When Tanja Hester retired a little over a year ago at age 38, she was considered a personal finance icon to many: She and her husband, Mark, 41, had managed to save enough to live on for the rest of their lives.
But she wasn’t always good with money.
When Hester was starting out, she had a more conventional approach to earning and spending — and made a lot of common mistakes. She worked hard and rewarded herself by buying the things she wanted, whether it was dinners out with friends, aspirational clothes (dressing for the job she wanted), fancy groceries, or other splurges; she had credit card debt and didn’t really think too much about it. Student loans loomed. Investing felt too intimidating — and Hester kept her fledgling savings in a garden-variety bank account with a meager interest rate that didn’t keep up with inflation, losing spending power in the process.
About seven years ago, after reading Vicki Robin’s early-retirement classic “Your Money or Your Life,” Hester had a “huge light-bulb moment,” and says it was the best financial advice she ever received.
“Robin and co-author Joe Dominguez talk about money as being a representation of the life force it took to earn that money. That was life-changing for me,” Hester told MarketWatch. “I’ve adapted that to think about not only what it took to earn it, but what that money could buy in future freedom. We tend to think of money as a reward, but in a way it’s already spent — you spent the time to earn it.”
Today, Hester is a success story of what’s known as the FIRE (Financial Independence/Retire Early) movement. And as a retired person she’s busier than she expected: she’s out with a book, co-hosts the podcast “The Fairer Cents” about women and money, volunteers, travels extensively, writes guest columns for MarketWatch, and continues to write the Our Next Life blog, chronicling her journey to — and now in — retirement. (Hester wrote the blog under a pseudonym for years until she gave notice at her job as a political and social-cause consultant.)
In Hester’s new book, “Work Optional: Retire Early the Non-Penny-Pinching Way,” she aims to bring her FIRE method to the masses. She stresses that she and her husband weren’t able to meet this goal because they’re naturally good with money (they’re not).
“We did it by accepting our natural tendencies and shortcomings, and by creating systems that set us up to succeed in spite of our worst habits,” she writes in the book.
Though the couple doesn’t have kids (which are costly), they both have health issues, which mean medical costs are on the high side. They are insured through the Affordable Care Act. The financial details of their early-retirement plan are outlined on their website.
The rise of the early-retirement movement, and this book, come at a time of increased attention on retirement security and income inequality in America. While early retirement is the subject of books, documentaries and countless blogs, capturing the attention of many, it’s at odds with the financial reality for most people: A recent Federal Reserve survey found that 40% of Americans wouldn’t be able to cover a $400 emergency. And with Social Security under strain, Americans under-saved and health-care costs soaring, retirement prosperity is a distant dream for most people at age 65 — much less at 45.
‘None of this has to be all or nothing. You’re just giving yourself options. That’s the real power.’
Hester hopes she can help people lessen their financial anxiety, whether they’re FIRE acolytes trying to accelerate their retirement date or just want to become more confident with money. “Don’t compare yourself to others,” she writes. “Instead remind yourself that most people never get to choose when they retire. Every day of freedom you buy yourself before age 65 is a big win and worth celebrating.”
Hester talked with MarketWatch about saving, investing, money, work and her first year of early retirement.
What was your biggest money mistake?
Early in my career I had a different spending philosophy, I ran up a lot of credit card debt living a life I thought I was supposed to have. I lived in D.C. and L.A., and they are expensive cities but I didn’t try hard enough to make those cities more affordable. In hindsight, I understand why I did that, but I don’t look back and think “I’m glad I wore those clothes and went to that happy hour.” No one looks back and thinks “I’m glad I kept up with the Joneses.”
How old were you when you started saving seriously?
I was 32 and Mark was 35 when we decided to start saving for early retirement. Before that, we’d already built some saving muscle saving for our first place in L.A. and then later our “retirement home” in Tahoe, so we weren’t starting from scratch.
What was the first step?
Because we’d already checked off other financial goals — paying off my debt and saving for homes — we’d cut some of the truly frivolous spending and were saving at a decent level. The first step that marked the transition into saving for a truly ambitious goal was to amp up our investing. We increased our automatic monthly investing a few hundred dollars a month until it hurt, and once we hit that point, we dialed it back just enough to give ourselves breathing room. We didn’t want to take all the fun spending out of our budget, but rather than chop our spending dramatically, we tried to tighten the belt one notch at a time.
How do you get a partner on board?
Starting the conversation with money is bound to be problematic. It’s a reflection of so much stuff and people get defensive. Instead ask each other: What do we want out of life? What do we want to be able to do together? Are we on track now? It’s just more inspiring and fun to talk about. Then you think of the money as a tool. Mark and I were not of similar money habits early on, but we were much aligned with what we did and didn’t want in life, like not caring about impressing other people, and wanting to see the world.
What were you most looking forward to in early retirement? Did it live up to your expectations?
Short term, I was looking forward to catching up on sleep. Not having to be reachable all the time. Not having to go on business trips every week. Another thing was obviously the travel. We went to Taiwan, Mexico, Monaco and France in our first year. That totally lived up to it. It was great being able to do longer trips and not have to worry about Wi-Fi. The main thing I was looking forward to was more time with Mark. We expected that more time together would instantly bring us closer. That part didn’t meet expectations. Even when retirement is happy and by choice it’s a stressful thing. We were not expecting to have relationship angst. Even if you’re aligned, people process things differently. We have talked to other early-retirement couples, everyone has a pretty rocky first year. Statistics on traditional retirement show that couples have a hard time. You have to go into it committed to work through it.
How are you handling the market volatility?
We are doing fine. We knew there was a good chance we’d hit some volatility or recession early on considering how long the bull market had been. We built a very conservative strategy. We are not trying to take out 4% every year, it’s more 2% to 2.5%. We prepared for sequence of returns risk. We built up a good cash cushion.
A lot of our side interests do pay a little. Our expenses are low, so that’s a nice side benefit. I don’t know any early retirees that are earning zero money. Most of us are interested in multiple things and want to be useful in the world. For me, I got some money for the book, Mark has had the opportunity to do some small “passion project” consulting gigs. We saved enough to never need another penny, and if somehow the book does super well and I actually see royalties from it, I’ll donate those to charity.
What’s the last great thing you purchased?
We took a trip to France this winter. It was almost a month and we spent time in Paris, Provence and the Riviera, and I loved every second. There were some areas where we tried to contain costs. We kept lodging reasonable by traveling off peak, we used reward points I had left from work. We rented a car and I did a lot of research to make sure I got the best rate. Other stuff, like meals, we didn’t worry about as much. If one day we had a big splurge-y meal, the next day we’d have cafe food. We were careful about what we paid admission for. Sometimes you can get the spirit of a place by walking around and doing the free things.
What do you splurge on?
Travel. It’s a big world and we want to see as much of it as we can. We have gotten smarter about reducing those expenses.
What do you skimp on?
I’m currently sitting in a 55-degree house tending a fire of wood that Mark chopped and split! Utilities are one area. Also cars and transportation. I still drive a 15-year old Honda Civic. There’s no duct tape on it, it gets me places!
What’s the worst financial advice you’ve ever received?
There is so much bad advice out there. All of the stuff that has a blanket answer: “You need $5 million to retire” or “You need an 80% replacement rate.” Anything that has a magic formula or a one-size-fits-all solution. Personal finance is always personal. We should treat it that way.
The main thing I wanted to do with the book is to take the early-retirement discussion away from this place of high-earning-30-somethings-in-tech and break it down into something much more accessible. None of this has to be all or nothing. You’re just giving yourself options. That’s the real power, whether you save enough to never have to go back to work again or not. People shouldn’t think of it in terms of “I can’t do the whole thing so I might as well do nothing.”
Do what you can, find how to fit this into your life and do it to the extent that works for you and you’ll still be better off.
What’s the most surprising thing about retirement?
The biggest surprise was how much I enjoy work now. And how much I choose to work. That was not my vision. Most people, when they’re aiming for early retirement they’re thinking of escaping work. It’s been interesting to see how when what I’m working on is my choice, those things feel like a joy. We’re presidents of all-volunteer organization boards, and that’s time consuming. The big thing we do [with our time] is outdoorsy stuff in our beautiful home mountains. Skiing in the winter, hiking and biking in the summer, camping whenever we can, That was our reason for leaving L.A. and moving to Tahoe.
None of it has to succeed. It fills me up. The point isn’t whether you’re earning money or not…it’s how you choose to spend your time. You’re expressing the freedom you’ve created for yourself. I couldn’t have written a book while I was working full time. Retirement let me fulfill a lifelong dream.