Podcast Summary: HerMoney with Jean Chatzky
Episode 459: How To Retire Early Without Hating Your Life
Release Date: January 22, 2025
Introduction to FIRE Movement
Jean Chatzky opens the episode by delving into the FIRE Movement—an acronym for Financial Independence, Retire Early. She explains that FIRE advocates living below one's means and aggressively saving and investing to achieve financial freedom at a younger age. While some adherents of FIRE adopt extreme frugality, Jean emphasizes that there are diverse paths within the movement that don't necessarily involve sacrificing life's pleasures.
"FIRE says live below your means. Invest as much as possible as early as possible so that compound interest can work its magic and give you a life where you don't have to work if you don't want to work."
— Jean Chatzky [00:26]
Guest Introduction: Shang Saavedra
Jean introduces Shang Saavedra, the founder and CEO of Save My Sense, who achieved FIRE by the age of 32. Shang is also the author of "Wealth is a Mindset: Change Your Mind, Change Your Money", where she explores the psychological roots of financial challenges and offers strategies for breaking free from limiting money habits.
"FIRE is nothing new. It's been around since 1992, but it has gained significant ground in the last decade, particularly as younger generations save more for retirement earlier than previous generations did."
— Jean Chatzky [02:55]
Shang's Journey to FIRE
Accidental Beginnings and Privilege
Shang shares her journey into FIRE, highlighting that it was an accidental path influenced by her privileged background. Her parents, immigrants who embraced frugality, instilled in her a strong sense of financial literacy and saving from a young age. This foundation allowed Shang to graduate college debt-free, a significant advantage over many peers.
"I didn't know what FIRE was. I had been frugal most of my life. I was lucky that my parents shared a very frugal mindset and lifestyle with me."
— Shang Saavedra [03:26]
Motivation: Balancing Career and Parenthood
During her early career in management consulting, Shang attended numerous panels discussing the challenges of being a working mother in the corporate world. The lack of maternity and paid leave options motivated her and her husband to devise a financial strategy that would alleviate the financial stress associated with parenthood. This led them to adopt the FIRE principles of living on the lower of their two incomes.
"We decided to live off of the lower of our two incomes, maintaining that for the rest of our lives so that the additional costs of becoming a parent would not impact us significantly."
— Shang Saavedra [04:55]
Lifestyle Changes and Emotional Impact
Initial Struggles with Frugality
Shang candidly discusses the emotional toll of her early FIRE journey. Transitioning from a high-earning management consultant role to a frugal lifestyle in New York City was challenging. She grappled with feelings of misery and self-doubt, questioning her budgeting skills as she saw peers enjoying more lavish lifestyles.
"The initial attempt at living off of the lower of our two incomes was pretty misery inducing for me. I struggled day in, day out."
— Shang Saavedra [06:18]
Finding Fulfillment Beyond Spending
Over time, Shang discovered that true fulfillment didn't come from spending money but from meaningful connections and simple pleasures. By redefining her approach to social activities—like choosing a dessert walk over expensive dinners—she found joy without overspending. This shift in mindset allowed her to sustain the FIRE lifestyle without sacrificing happiness.
"I realized I can have companionship with my friends by having a dessert, a walk around the park, a bagel breakfast. I don't need to spend $100 on a bagel breakfast."
— Shang Saavedra [07:43]
Understanding FIRE Math
The 4% Rule
Shang explains the FIRE math, focusing on the popular 4% rule. This rule suggests that if your annual expenses are 4% of your net worth, you can sustain your lifestyle indefinitely through investment returns.
"The most popular one is called the 4% rule, where it basically states that if your annual expenses are equal to 4% of your net worth, then you're considered to have enough in net worth to fuel your lifestyle and retire for the rest of your life."
— Shang Saavedra [12:43]
Building Net Worth
To achieve this, Shang emphasizes the importance of raising income and lowering expenses. Saving 40% or more of income and investing wisely allows one's net worth to grow significantly through compound interest.
"With the underlying market growth of those investments, that pushes their net worth eventually to 25 times their annual expenses."
— Shang Saavedra [14:06]
Strategic Expense Management
Food and Cooking
Shang details how she optimized her food expenses by simplifying her meals into basic components—proteins, starches, and vegetables. This approach reduced both the complexity and cost of cooking, allowing her to enjoy a healthy diet without overspending.
"I started designing all of my meals as a protein, a starch, and a veggie fruit of some sort. And so instead of thinking of my cooking as I need to make all these recipes, I was like, I just need to pre-cook batches..."
— Shang Saavedra [14:43]
Housing: The Biggest Lever
Housing expenses were the largest area of savings. Shang and her husband secured a rent-stabilized apartment in Manhattan, significantly reducing their monthly rent. Despite the small size and minimal amenities, this choice was pivotal in their ability to save aggressively.
"Housing is the biggest lever that you can pull. The apartment's nothing fancy. It was convenient. It had a lot of light, lots of ceiling space..."
— Shang Saavedra [15:48]
Income Considerations and Career Flexibility
High Earners and FIRE Accessibility
Shang acknowledges that FIRE is often more accessible to high earners due to their ability to save more. However, she encourages those with lower incomes to focus on reducing expenses and living in more affordable areas to achieve similar financial goals.
"If you are on a lower income, it primarily means that you need to have lower expenses. So that may mean not living in a prime city like New York City or San Francisco."
— Shang Saavedra [17:20]
Boosting Income Through Flexibility
Despite the current challenging job market influenced by AI automation, Shang advises maintaining career flexibility. She highlights the importance of viewing one's career as a collection of skills and networks that can be adapted to different industries. Additionally, she suggests side hustles as a viable way to increase income and mitigate financial risks.
"The best thing that you can do is not see your career as one set path with one kind of job. Think of yourself as someone who has a collection of skill sets and networks."
— Shang Saavedra [19:18]
The Importance of Community in FIRE
Feeling of Loneliness
Shang admits that her journey to FIRE was initially isolating. Before discovering the Mr. Money Mustache blog and other online communities, she felt lonely and was hesitant to share her financial goals with friends, fearing misunderstanding or judgment.
"I was so lonely the entire time. Before I discovered Mr. Money Mustache blog, it was just me and my husband."
— Shang Saavedra [22:22]
Finding Support and Celebrating Under Consumption
With the rise of online communities and social media, Shang found solace and support among like-minded individuals. She appreciates the trend of celebrating under consumption and believes that having a community is crucial for sustaining the FIRE journey.
"I'm glad that there's a very healthy personal finance conversation and community across TikTok, Instagram, Facebook."
— Shang Saavedra [22:22]
Post-FIRE Life and Redefining Retirement
Beyond Financial Independence
Shang clarifies that financial independence (FI) provides the optionality to define what retirement (RE) looks like individually. For some, it might mean stepping into part-time roles, pursuing passions, or balancing family responsibilities more effectively.
"The FI gives you the options to define what RE is going to look like for you. And whatever you choose, that's your journey."
— Shang Saavedra [26:34]
Personal Transition to Entrepreneurship and Parenthood
Following a health scare, Shang decided to leave her corporate career to focus on her family and expand her personal finance business. Achieving FI allowed her to make this transition without financial pressure.
"After delivering my second child, I ended up being in the ICU... that event really pushed me to ask myself, what do you want to do with your life."
— Shang Saavedra [23:48]
Practical Framework: FIT
Shang introduces her FIT framework for saving and investing, offering listeners a structured approach to achieve financial goals.
- F - 401(k) and Employer-Sponsored Accounts: Maximize contributions to tax-advantaged retirement accounts.
- H - Health Savings Accounts (Optional): Utilize HSAs for healthcare expenses if applicable.
- I - Individual Retirement Accounts (IRAs): Contribute to traditional or Roth IRAs to further grow investments.
- T - Taxable Brokerage Accounts: Invest in regular brokerage accounts for additional growth without tax advantages.
"FIT stands for F-H-I-T, which is the order of accounts that I like to recommend to people to consider using to save for retirement."
— Shang Saavedra [27:59]
Conclusion and Final Thoughts
Jean wraps up by thanking Shang for her insightful contributions and highlights the importance of community and adaptable financial strategies in achieving FIRE. She encourages listeners to explore Shang’s book and upcoming resources for further guidance.
"Shang Saavedra, thank you so much for being with us today. I know that you are going to come back and answer some mailbag questions for our listeners on a later show."
— Jean Chatzky [29:35]
Key Takeaways:
- FIRE Movement emphasizes living below your means and investing aggressively to achieve financial independence early.
- Personal journey to FIRE can be influenced by individual motivations, such as balancing career and parenthood.
- Emotional resilience is crucial; finding fulfillment beyond spending helps sustain the FIRE lifestyle.
- FIRE Math and frameworks like FIT provide structured approaches to saving and investing.
- Community support plays a significant role in maintaining motivation and overcoming isolation during the FIRE journey.
- Post-FIRE life offers flexibility to redefine retirement, focusing on personal fulfillment and meaningful pursuits.
Notable Quotes:
-
"Achieving crazy goals was a way for me to gain that affirmation."
— Shang Saavedra [10:24] -
"I was too scared and too ashamed to even share what the heck that I was doing with any of my friends because I was like, I don't think people are going to understand."
— Shang Saavedra [22:43] -
"Financial independence provides the options to define what retirement is going to look like for you."
— Shang Saavedra [26:34]
For more insights and resources, listeners are encouraged to subscribe to the HerMoney newsletter at HerMoney.com/subscribe and explore upcoming programs like Finance Fix and Investing Fix.