Freed by 50

I was catching up with a longtime friend over the weekend. He and I have a tendency to spar a little when we’re talking. A little ribbing here, a little joke about the hairline (or lack thereof) there, maybe a nutshot about an ex-girlfriend if we’re going for the big laugh.

When the subject of his impending retirement from the NYPD came up he said he’s starting to look at “career 2.0” and exploring a bunch of opportunities. He’s lucky. He’ll get a pension. A rarity in today’s world, but not enough to retire at 46 and send two kids to college while paying the mortgage and everything else. He needs to work at least another ten years before he can tap out. Fully retiring at 56 is still amazing, so I’m still happy for him.

“I’m looking to hang it up by 50.” I said, “I even have a blog about it. You can’t see it, before you ask.”

“Must be nice. You tech assholes get paid too much.” He said as he laughed.

(Before I sound too much like a dick, it should be known that we have known each other for 25 years. We’ve seen each other lose jobs, both nearly lose our first houses, get married, have kids, find careers, and helped each other succeed. Our witty banter always comes from a place of caring, but wanting to get the biggest laugh.)

“You know how you get to have a million dollars?” I asked.

“You make a shit-ton of money like my sister I guess. I’m not gonna have that problem.” He replied.

“You save it. First a little. Then a lot. You don’t go out with your friends so you can pay off debts. You drive a 2006 Honda Civic even though you make $120k. You buy your shirts from Old Navy only when they go on sale. You negotiate a raise, change jobs for more money, and then instead of taking a vacation to celebrate, you max out your 401k with the raise. You forget you ever got the raise. Repeat that two, three, four, times until you can’t hide the money from yourself anymore. Then you force yourself to invest what you don’t need at the end of every month instead of buying a new toy. You keep the two burner BBQ until you can’t possibly fix it anymore and then sell it to someone who can. You buy your kids clothes secondhand in big garbage bags and pay by weight. And even then, year after year your balance only goes up fifty, sixty thousand. You hit a hundred k and kind of celebrate. The needle barely moves the next year. Year after year it seems like you’re stuck in mud as the balance slowly creeps towards the next hundred k. It’s fucking painful and all you want to do is accept that you’re kind of rich already and you can probably stop doing all this shit. But there’s progress, and the progress drives you. And then one day the market takes a little jump up and you check your balance and just like that, you’re a millionaire.”

I’d actually practiced this rant expecting to write about it here, but thought I’d try it out on a friend for fun.

“Now ask me how I know this.” I said. This was the first time I’d ever admitted to a friend that I’m a millionaire, but I’d come this far.

“Because you’re a dick.” He said, letting me off the hook, but letting me know the message was received.

“Now ask me how you get to two million dollars.” I said.

“How?”

“You do all that shit I just said, then wait five to seven years. I’ll let you know when I get there. By the way I forgot my wallet so I guess you’re paying.”

That’s a long way for me to go to explain the Rule of 72. Which in short is the calculation you would use to estimate the amount of time it would take for an investment to double. But I felt like my conversation illustrates how wildly different it is going from saving (and investing) one million dollars to two.

In my own case it took eleven years to go from a net worth of about -$360k (that’s negative $360k), to $1M, and then another three years to go from there to $1M liquid and $1.4M net worth. At this rate, I need the Rule of 72 to be on the generous side while I continue to save and invest to double my net worth in the next five years.