How a Teacher Thinking About Early Retirement Does Money

Photo credit: Loco Steve, CC BY 2.0.

Julia (not her real name) is a 23-year-old teacher in Mississippi.

So, Julia, how much are you making?

I make $36,000/year, and my take home pay is $2,110/month.

I just started working, so my total income for 2016 will be significantly less than that — I’ve only had three months of making that much.

Because you started teaching in the fall. Got it.

Yep, I started teaching at the beginning of August. Prior to that, I didn’t work for money in the summer, so I was living off the money I saved from my jobs in college.

But your teaching job will pay you year-round?

Yes, it will. I’ll probably get another job in the summer, so I’ll have some extra income then, in addition to my teaching income.

How does your income compare to your expenses?

My income more than covers my expenses, and there’s two factors going into that — Mississippi has a very low cost of living, and I’ve been really intentional about avoiding lifestyle inflation when graduating and getting a full-time job. I’m still living like a college kid, for the most part.

Same furniture as before? Same apartment as before? What parts of your college lifestyle are you keeping, and what are you changing?

Not the exact same furniture and apartment, because I moved for this job. I bought a new mattress when I moved, and I bought a couch for $50, but I haven’t bought much else to furnish my house. My house is furnished at the same level as the houses I lived in during college.

The last house I lived in during college was actually a lot nicer than my house is now, and the rent was about $200 more.

In terms of changes, I think I’m spending a bit more on going out for coffee and drinks, and buying clothes, and I got a cheap gym membership.

Do you track your expenses? Do you know for sure whether you’re spending more on coffee/drinks than you were before?

Yeah, I use Personal Capital to track my expenses. I’ll check right now.

It looks like my restaurant/coffee/drinks expenses actually had an uptick in May, then again in July, and now they’re back to pre-summer levels.

Clearly you helped contribute to Starbucks’ 1 percent decline in traffic!

Starbucks Wants This Election to Be Over Just as Much as We Do

Ahah, I probably did! I’m sure Starbucks can deal.

Yeah, they’ll be fine.

So what about other lifestyle changes: savings, emergency funds, retirement, etc. Are you putting money away for those?

Yeah, I’m saving money for retirement in a Roth IRA, and I have an investment account. I had a finance teacher in high school who did a whole lesson on the benefits of starting young for compounding interest, and I totally drank the Kool-Aid.

I’m hoping to be in a position where I could buy a house in the next five years, and I’d like to go to grad school at some point. I don’t know exactly how much those things will cost, so the money that I’m saving/investing has a sort of generalized purpose right now. I’m also thinking about early retirement and trying to figure out how I could make that happen.

Can you break down where your money goes? Just the big things: how much goes to rent, how much goes to debt if you’ve got it, how much goes to savings, how much to retirement, etc.

Okay! I spend $165/month on rent, around $45 for electricity (my roommate pays me back for half of that), somewhere around $225 for groceries, $50 on gas, $10 for my gym membership, and $40 for Mississippi Association of Educators dues. I don’t set a budget for restaurants/alcohol, but last month I spent around $70.

Missing from this list are expenses that my parents still cover: my phone and my car insurance. I’ve talked to them about staying on the family plan, but paying them back for my portion. We still haven’t worked out how much that would be.

I set a goal of saving $950/month, but I don’t really divide that into saving for different things. It all goes in one place.

So how much would you have to save to hit early retirement? $950 a month is a great start, and you don’t seem to have a gob of expenses. ($165 for rent and $10 for a gym membership!)

It depends on so many things. If I stuck with this budget, I’d be able to retire in 18 years, according to the Networthify calculator.

Early Retirement Calculator

But I’d like to retire earlier than that, so I’d need to find a way to make more money. I’m thinking that will come from making more money from my job and investing in real estate.

Making more money from my job will come with time (teachers have a set pay schedule) but I could also make more by getting a master’s degree or working in an afterschool program.

I’m also really unsure if I want to be teaching forever, so if I got a different job, that would change things.

But the idea is that you’re going to take that $950 a month and invest it, and in eighteen years you’ll have enough to live off the dividends for the rest of your life? And even if you changed jobs you’d still have all those savings/investments?

Yeah, that’s the Mr. Money Mustache style plan. I’m not sure that’s exactly how I want to do things, more like that’s one option that I’m considering.

I also have to consider that my expenses will probably go up at some point in time.

That was the other question I was going to ask. Expenses do go up! Even if we don’t want them to!

Yes! I’m probably going to want to live in a nicer house at some point in time.

And then you have to make the choice: better house now, or early retirement later (and the same house forever)? And you don’t even know if you’ll be able to do the early retirement thing until it happens.


Yeah! And so many unexpected life things could come up. What if I meet somebody and want to move to be with them? What if one of my parents get sick and I want to move home to care for them? What if I decide to have a kid? The future is unknowable.

With that in mind, my last question: What advice do you have for Billfold readers?

That’s a tough question. I feel like I’m coming into personal finance with a lot of privilege and I know that isn’t true of everyone. I guess it would be this: save money even if you don’t know exactly what you’re saving for. I have this big lofty savings goal. Even if I decide not to do early retirement, even if I decide not to buy a house, I feel like future me will be glad that present me saved a bunch of money.

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