If you want to make wise decisions about your money, then you don’t necessarily want to rely on conventional wisdom. Just ask Harry Sit of The Finance Buff, who is poised for retirement in his 40s. “One piece of conventional wisdom I steer clear of is that nickeling and diming on small expenses as the key to save money and build wealth,” he says.
Instead, Harry does the opposite by spending a little extra on small expenses as rewards for doing the big things right.
We were so impressed by our last interview with Harry, we thought we’d check in with him again, this time to learn more about his early retirement strategies and personal finance philosophy. Here’s what he had to say:
What excites you about personal finance and investing? Why are you so passionate about these topics?
I see managing personal finance and investing well more as a necessity for securing our financial future. We work hard for the money we earn. It behooves us to make the most of it. Using the money more efficiently will let us keep more of it. Investing the money well will grow it. Not doing personal finance and investing well means wasting our days, months and years of labor. That’s why I’m so passionate about these topics.
Who inspires you in these areas? Who do you look up to? What makes them good thought leaders?
Early pioneers of index investing John Bogle, Charlie Ellis and Burton Malkiel inspire me. John Bogle’s famous quote, “Stop trying to find the needle. Invest in the haystack” and the index funds he created at Vanguard changed the game of investing for individual investors. They are good thought leaders because they bring solid research to the investing public.
What are some of the most important personal experiences you’ve had as far as how they’ve informed how you manage money?
One of the most important personal experiences was my mismanaging our investments during the 2000-2002 bear market. The sum of money I lost was quite significant to us back then. Fortunately, I learned the lesson early enough and I started doing it the right way: no more picking stocks, chasing hot managers or timing the market. It helped tremendously in getting us where we are today.
You set out to retire in your 40s. Why has this been a goal for you?
The goal isn’t necessarily to retire, but rather being able to retire. Having enough money to retire in our 40s gives us the freedom to choose what we do. It could be to work in a venture for personal and professional achievement. Or it could be freeing up time for hobbies outside work.
How did you go about making a plan to reach this goal? What’s been your strategy?
The strategy is simple and obvious: earn a good income, save a large part of it and invest the savings well. Each of the three parts is important, and I would say a good income is the most important. Without a good income, you just don’t have as much to work with. A good income also makes it easier to save a large part of it. When you invest it well, you are then adding more to a larger sum.
What stage are you at now on your way to early retirement?
My wife and I recently became semi-retired, literally. She quit her job to have more time to pursue her passion in outdoor sports. I continue to work for professional curiosity and achievement and for a higher standard of living than we otherwise would enjoy.
Aside from saving/investing, etc. what other considerations or changes have you made or do you plan to make as you head into retirement?
I’m thinking of pursuing a job that offers more opportunity for achievement at a higher risk, higher growth company even if the job pays less. If I fail at the adventure, I will still have stories to tell, and our financial future is still secure.
What advice can you offer others who like the idea of retiring early, but have no idea how to start planning for it?
I only know the simple and obvious strategy that worked for us: earn a good income, save a large part of it and invest the savings well. In terms of the difficulty of execution, from the easiest to the most difficult, it probably goes by the reverse order. Investing in low-cost, broadly diversified index funds and/or ETFs would be the easiest. Keeping expenses at bay would be next. The most bang still comes from increasing one’s income.