Miriam from Millionaire Millennial

Learn how Miriam from Millionaire Millennial is going to retire early and become financially independent as a teacher.

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What is your backstory and how did you first get interested in FIRE?

I have always been a saver and interested in learning about personal finance. I discovered the FIRE movement last November, right around the time I was buying my first home. Miserable at work, the idea of retiring early was a dream. I found FIRE through the Choose FI podcast and they had produced several very technical/mathematical shows at that time. Listening to explanations about how the math works convinced me rather quickly. I had read many articles in the past about 30-somethings retiring, but I always felt that was impossible for me to ever achieve as a public school teacher. My main concern was building a million dollars in my traditional retirement fund by age 60. After I listened to the Millionaire Educator episode, I googled my school district and “457,” and discovered that I had access to the 457 account. No one else in my building had even heard of it! When I researched it further, I found Vanguard index funds available at half the market rate for their expense ratio. So I opened one and started contributing. With my recent raise, I started contributing more, I am now at $200 a check going in. With each raise, I will add more to my bi-weekly contributions. 

As I listened more to Choose FI, I started learning about other calculations I could do for potential futures that I had never considered before. One day I wondered what would happen if I changed jobs then took my contributions out of my pension fund. I not only realized that the money would be worth many times more as a Rollover IRA than as a pension, I learned that we can take 50% of our employer contributions with us once we are fully vested in the system. So that means I am essentially getting a 7% employer match, if I take the money out. That was really the key for me to transition from thinking “FIRE is a neat idea” to “I am pursuing FIRE.” Since then, I have been figuring out how to increase my contributions to my 457 while seriously attacking debt. By the end of 2018, I will have been able to increase my net worth by $25,000 (or more) since February 1st. I have a small amount in student loans but my main concern is my auto loan. Unlike many in the FI community, I am not obsessed with old Toyotas or Hondas. I like my current car, but I do want to pay off the loan early. My plan for my student loans is to work my five years until I achieve Teacher Loan Forgiveness, which will be worth $17,500. That five year mark will also allow me to maximize what I can withdraw from my pension fund. Switching into a higher earning career in business will accelerate my path to FI.

Why is FIRE important to you?

FIRE is important for me because it brings a sense of security and a sense of hopefulness. The idea of working 35 years as a teacher lost its intrigue after my first year ended. I knew that I would need to change careers because teacher burnout is real. I earned a degree in pure mathematics and then got a master’s in education because I knew the pure math degree would allow me to go into business if I tired of education. That time came a lot sooner than I expected. So now I am able to enjoy the days with my students more because I don’t feel trapped. I know this is one part of my life rather than my whole life.

I also believe that I was predisposed to accept FIRE because of my family. My grandpa was heavily invested in the stock market and left my grandmother a sizable portfolio on top of a secured pension. People from that generation expected to earn a pension and there really was no need to have individual retirement or taxable accounts. He wanted to build wealth to take care of his family. Eventually that nest-egg will pass on to my parents. Saving was taught to me as a young child and I remember my dad having discussions with me about “want vs. need.” My father also retired when he was 52 and I was a sophomore in high school. My parents paid off their mortgage a few years early and have always been careful with their money. I like trying to be like my grandpa; learning how to optimize my investment strategy makes me feel close to him. I want to have money in case of emergency and to provide freedom for me and my family. I struggled in the past to save money consistently because I didn’t see a point. Now I am more focused and it’s more exciting as my income increases to figure out the best way to save and to invest my money.

Finally, I want to have more time in my days for creative endeavours. I also have an English degree and I always secretly dreamed of being a full-time writer. Now it doesn’t have to be a secret and I know one day I will be able to write for hours on end every day. Also, as a high school student I was heavily invested in art. I would love to begin painting again, maybe even taking classes in pottery and sculpting. 

What other types of income do you have outside your main job? (housing investments, side hustle, etc.)

I currently have a house hack going on. I have a roommate who is paying an amount equal to my Principal & Interest on my mortgage. I live in an affordable Midwest city where it is actually better to buy than to rent. Every time he pays me, I immediately transfer money onto my auto loan. I am interested in building an Etsy shop but haven’t quite got that together. I have in the back of my mind to turn my home into a full rental because I knew it used to be a rental a few owners ago.

One thing that is nice about my job as a math teacher is that I am very “in demand.” I have never worried about getting RIF-ed (when they reduce the number of teachers). Also, if I were to be cut or fired, I would have a few months notice because schools prefer to hire in April or May, but we get paid through mid-July. So I mostly am focused on building up my various investment accounts. 

What tools, processes or services has helped you save or make more money to achieve FIRE faster?

I am a big fan of doing things myself. While I do have a Personal Capital account, I actually spend more time in Google Sheets or Excel documents. I download my credit card statements and label everything one by one and then do sumifs functions to total the categories. I started doing this after reading Vicki Robin’s Your Money or Your Life. She says to create your own categories and then ask “is this level of spending worth the life energy I traded for it?” Doing this essentially by hand makes me become more familiar with each thing I spent money on.

I use a spreadsheet to compile future projections for my different accounts. I often use Dave Ramsey’s investment calculator for future projections because it is easy to read and a nice format. 

The simple concept to save 100% of all windfalls has been important for me. I got a grievance settlement worth over $5k after taxes right before I bought a house. I put all of it into my down payment, increasing my equity and lowering my PMI and overall interest payments. This summer I got a bonus for my evaluation rating and that built up my new emergency fund. Now when I know I am going to earn more money, whether a raise or a windfall, I make a plan before I actually see the money hit my account, and I execute immediately. This prevents me from rethinking what to do and suffering from decision fatigue.

I take advantage of a variety of banks and account types to help me achieve various goals. I use a Barclays High Yield Savings account for my emergency fund. The interest rate is close to expected inflation, at 1.85%. I use Charles Schwab for my brokerage and Roth accounts. Schwab has a lower barrier to entry for index fund investing ($100 to start vs. $1000, $3000, or $10,000 at Vanguard) and has lower expense ratios. I think Vanguard offers more types of index funds, but I would never have started investing if I could only enter with thousands of dollars. I simply don’t have the income to achieve that quickly or to feel comfortable with it. I use my 457 for all pretax contributions. I opened a Chase checking account recently because they offered a bonus for setting up direct deposit. I then pay off my Chase Credit Card through that checking account. And I use my lifelong credit union for checking and spendable savings, which basically is money I save up to spend on larger purchases. I don’t need a great interest rate because the money is going to be spent in the next year or so anyways.

And my most important tool is my composition notebook. Like my grandfather, I keep a handwritten ledger. I handle all my math myself and I write out new ideas in full as I think of them. I started doing this in high school to keep track of my scholarship funds. Writing by hand is the best way to commit an idea to memory and essential to the success of any plan.

Where do you see yourself in 5, 10, 20 years?

In 5 years, I hope to be working in a new field, perhaps as a data analyst. I am not in a serious relationship now, but I hope to be by then. I would hope we’d merge our finances and our goals, so a lot could change.

I am currently projecting that I hit my FI number by 40. The reality of me switching careers will probably move that date forward. I am confident that between 10 and 15 years from now I will have the option of stopping full time work.

In 20 years, I hope to have written a book or two. 

If you were just getting started in FIRE, what would be the first steps you took to building your path towards financial independence?

This is specific to teachers: Opening a 457 account, opening a Roth IRA, and saving as much as possible. The 457 has great options for investment and it is the best account out there, in my opinion. You lower your taxable income in the present day but you can access the money before you are 59 ½. Now that you have a way to keep yourself in the 12% tax bracket no matter what, maxing out a Roth IRA is the next step. That money will grow to be a large amount by the time you are 60 or 70. Having a tax free bucket is essential and it makes sense for people in the 12% and 10% brackets to contribute to one. You’ll pay a lower pure number in taxes now than you would in the future from withdrawals from a traditional IRA. Hitting that 50% savings rate is the holy grail of the FI community and for good reason. 

In your opinion, should people striving for FIRE focus on lowering their spending or increasing income?

I think the first thing should be to focus on lowering spending. When you are mindlessly walking through life, you aren’t paying attention to where your money goes. I believe it is OK to go out to eat or to buy new clothes once in a while, but when you look at your credit card or bank statements, you don’t want to be surprised at what you see. I have had plenty of those moments in the past, but now when I look, I know what to expect. Once you get to a point when you are comfortable with a lower spending level, then think about higher income. Higher income isn’t always the best choice either. I had a chance to make more money this year by transfering to a different school than the one I chose to transfer to. But I would have given up the entire month of June in vacation time. I reflected and decided I really need that time to decompress and recover from the school year. I simply wasn’t willing to give that up. I’d rather eat out less than make more money. But I am also in a system where “more money” means a few thousand dollars. I am still making more money at this new school, but not quite as much as I could have, had I given up the month of June. For others who might be able to increase their income by $20-40k with a new job, they might feel differently. 

Are there any communities that you chat with about financial independence? If so, what value do they bring to you?

Choose FI Facebook Group

Fire Drill Podcast Facebook Group

I like that I can post questions and get answers within an hour or two. Someone from the Fire Drill community emailed me a lease they use for their house hacks and I used that with my roommate. I try to post responses to others when they ask questions, often people are polling others to just see what they’re doing or what their plan is. I like answering those questions.