Way Too Transparent: All the Money We Made

Whenever someone asks me how we're able to even consider hitting financial independence or an early retirement by the time I'm forty, I try to be honest. I try to avoid the temptation to tell them it's because we drive a paid off car, that we use our bikes or scooters when we can, or that we budget and watch what we spend on food.

I try not to tell them it's because we travel hack to get cheap travel, or that the things we like to do, like board game nights with some friends and a twelve pack, end up being cheaper than hopping from bar to bar.

Not that those things aren't true. They are, and to some small degree they do save us money. I just think leading with those details of frugality is, well, kind of misleading.

Our frugality, to the degree that it matters, is secondary to what I like to think is an open secret when it comes to financial independence: that most people achieving this goal are doing so because they earn more, often much more, than the median income.

But here's where things get tricky. While I have always tried to be honest with the handful of readers who come here, I also value our privacy. It's a bit of a paradox. I've written anonymously so I can be open, but I also keep things close to the vest because I worry about how people would react if they really had a good idea of our financial situation. 

Would we seem like rich, privileged assholes?

What if some enterprising troll was able to figure out our identities?

Still, I'm trying my best to get over these sort of thoughts. It's scary to open up, but I think it's probably a worse thing to tiptoe around key aspects of our story, always being a bit worried about what people might think. And I've been inspired by a blogger friend who's written about the importance of transparency.

So if I believe that our income is the main reason we're able to work towards financial independence and an early retirement, shouldn't I be able to speak to that with some specificity? Might it even be helpful for others to see exactly what we talk about when I say that a rising income is the thing driving us to financial independence?

So let's talk about that a bit today. 

Dig in, voyeurs. Below is all the income Mrs. Done by Forty and I have ever made from our jobs

Click for bigness

So let's give a little context to that eye chart.

• We pulled the numbers from Social Security records, and updated the figures to add back in our contributions to our HSA. (Fun fact: money you contribute to an HSA is not taxable for Social Security.) All income figures are rounded to the nearest $100. For clarity, these numbers don't include 401k match, stock purchase plan benefits, or rental income.
• Just to walk through some of the figures: I worked a bit on the weekends and after school during high school (1994-98), mostly so I could buy clothes and go to movies and, later, put a little gas in the car
• After two years in undergrad I dropped out in 2000 to move to California, working at the Red Cross during the day and Hollywood Video at night for a year, until I got a job at the state university in 2001. This job didn't pay much but did have amazing benefits, like completely free tuition. The school accommodated working students, so I was able to take 12 class credits in the evenings to finish my bachelors degree (thanks to once-a-week, three hour classes).
• I stayed in this job through 2009, earning my teaching credential along the way. I figured staying at the same job was a good thing, not realizing the significant opportunity costs of staying with the same organization, especially when my starting pay was so low and raises at a government job were hard to come by. 
• After dating for a couple years from 2007-09, yet-to-be-Mrs. Done by Forty and I moved to Arizona so she could pursue her PhD. After teaching in Arizona for a hot second, I moved to the private sector and immediately saw a big jump in pay. 
• After a promotion, our combined salaries got over $100k, well above the median household income in 2012. This just happens to be when we stopped listening to Dave Ramsey's advice, and started getting curious about financial independence.

Is it a coincidence that we started making big financial wins, like becoming debt free, paying off a house, buying rental properties, and making quick progress to financial independence, right when our combined income was greater than average? Maybe. 

Maybe the progress was more due to the tips we picked up from Mr. Money Mustache. Maybe we would have been able to achieve all of the same things even without the added income, just through increased frugality: maybe more hang drying of our clothes and more bike rides would have made up for the lower income.

In our case, I think that's nonsense. The income is the driver of our financial independence, and it always has been. Frugality is a nice tactic and, believe me, I understand the logic that the frugal rich like to employ in these discussions. Well what about people who earn six figures and are still living paycheck to paycheck? They can't earn their way out of bad spending habits, right?

There's certainly some truth to that. If you're always going to spend whatever you make, then you can never earn enough to get ahead. The problem with that logic is that people earning six figures can dabble in frugality, read a few blog posts, and be making significant progress towards financial independence almost immediately. For them, frugality really does seem like a magic bullet because that one change shows huge results. Going from spending $100k a year down to $60k puts them on a fairly fast track to riches with what likely seems like very little sacrifice at all.

But with these case studies, the high income is there in the first place. It's easier to take it for granted when the big income was the constant and the frugality was the variable: of course we might ascribe causation to the changes in our spending.

But having an above average income is far more important, because no amount of penny pinching tactics matters when income is average or below average. When we were in San Diego, no amount of bike riding or clothesline drying would have made a dent in my student debt. No amount of budgeting was going to make material progress towards our financial goals.

And while I'll concede that moving to a much lower cost of living area has certainly helped, the kind of money we started making in 2011 would have been plenty to have us on a path to financial independence in San Diego, too. 

As I've said before, I don't think financial independence is possible for everyone. Incomes aren't high enough for huge swaths of our populace: for a myriad of reasons, employers aren't paying workers enough, and the wealth from profits is going to shareholders instead of employees. 

Because of a bunch of factors, not the least of which are the specific advantages I have from being a man who's half white and half Asian, our family has been able to buck that trend, even while one of our earners was pursuing a graduate degree and was only being paid for part time work. The median household income in 2018 was $63,179, meaning that without both of the adults in our house working full time, we made more than double the median income last year. Now that Mrs. Done by Forty has her new position, we'll be making quite a bit more than that.

That is the reason we're able to talk about potentially retiring when I'm forty. It's the income. Duh.

I suspect that's also the reason that so many others find these goals so hard to make progress on, despite being more frugal than I am. Despite eating out less often and avoiding car expenses, not because it's a great way to stack up cash, but because their income dictates they have to.

I don't want to sound like money management and watching costs doesn't matter at all. Clearly, these are foundational skills for personal finance.

But I don't want anyone reading this blog to feel like they were sold a false bill of goods. I don't want them thinking that they weren't able to retire at some ridiculous age because they weren't frugal enough; that they had treated themselves a bit too often. Because I don't think that's the real reason in most cases.

Most of the time, it's because employers just aren't paying their workers enough to cover expenses and to still have enough left over to pay down debts, and invest the kind of sums necessary to reach these sort of lofty goals.

And financial independence is a lofty goal. We're talking about having the ability to make work optional several decades before a typical retirement.

So if it seems like you're busting your tail and you're not making the kind of progress that you want to, or if financial independence just seems totally out of reach, maybe looking at the kind of salaries we were taking home during this time provides some helpful context for how this was possible for us. How we are lucky, and super privileged in all sorts of ways, and have not brought home average salaries for the better part of the past decade. 

If income is the problem in your particular household budget, maybe pushing for even more frugality is not the answer. Maybe it's applying to different positions: all of my material raises came from when I moved to a new company. Maybe the answer is education or training. Maybe it's a side business.

And if it's that sort of situation, maybe part of the answer is giving yourself a break, too. 

*Photo is from MIKI Yoshihito at Flickr Creative Commons.

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