Imagine growing up under the poverty line, never graduating college, having $55,000 in debt and earning well below $100,000 – and wanting to retire early.
That doesn’t shape up as your typical early retirement story. Yet this Montana couple – with five kids in tow – paid cash for their house and managed to retire at the ripe old age of 32.
It’s the stuff of the American Dream, a true story that needs to be told, heard (and read), and taken to heart. If this couple could achieve that status – with all the obstacles they faced – it’s a real possibility for anyone else.
That’s what makes Adam and Jillian Johnsrud’s story so exciting. But it gets even better. Like a lot of people who retire early in life, Jillian now earns far more money than she ever did in her working years.
That’s one of the common apparent contradictions in the F.I.R.E. Movement (Financial Independence, Retire Early). Those who achieve it seldom kickback to enjoy a life of blessed nothingness. Almost inevitably – free from the constraints of the daily struggle to survive – they move on to something bigger and better in life. They may even discover their dream job or occupation.
Making the Decision to Pursue F.I.R.E
One of the most important details in the Johnsrud’s story is their decision to pursue a life of financial independence and early retirement was entirely intentional.
Early in their marriage, the Johnsruds made a conscious decision to commit to living frugally. They decided to concentrate their money in the areas of life they felt mattered most, and say “no” to everything else. Using that strategy, they managed to save $250,000 in 10 years, and retire very early in life.
But like a lot of young couples, they started with an uncomfortable level of debt. The total was $55,000, made up of student loans, credit cards and medical bills. If we add the debt pay off total to the $250,000 in savings, the Johnsruds actually saved the equivalent of well over $300,000 in a single decade.
As you might imagine, reaching that level of prosperity required a few unconventional directions in life.
Extreme Frugality Strategies
During the 10 years leading up to early retirement, Adam and Jillian Johnsrud had a combined income that averaged between $50,000 and $60,000 per year. Using conventional means, that’s not the kind of income that would enable you to amass a six-figure investment portfolio in a single decade. To save 50% of their income they turned to extreme frugality.
As Jillian puts it, “We had 10 years of saying, ‘this is nice, but we have bigger dreams’.”
That translated into frugality in almost every area of their existence.
Feeding a family of six has the potential to bust any budget. But Jillian gets around that by keeping food costs to no more than $1 per pound. That’s mostly a matter of shopping and literally searching out food items that cost less than $1 per pound. Since most items in grocery stores are listed by price per pound, Jillian simply focuses on those available for under $1.
That strategy also enables her to avoid the need to chase sales and clip coupons, two strategies that are usually considered foundational to extreme frugality.
Clothing is another issue with such a large family. To keep this expense low, they buy big lots of used clothing, often from friends. That also saves time on shopping, avoiding the need to chase sales or sift through the racks at thrift stores.
Other strategies include packing lunch every day (when they both worked), driving a “beater” car, and living in an old camper for a time so they could pay off their debts faster.
Says Jillian, “Those hard choices gave us the amazing lifestyle we have now.”
Buying the ‘Ugliest, Nastiest Home’
By the time the Johnsruds had amassed $200,000 in savings and investments, they were in the market to buy a home.
Now they could have gone the traditional route of buying the most expensive house they could afford. That might have meant paying cash for a $200,000 property, or even making a big down payment – with a big mortgage – on a dream home.
Determined not to be sidetracked from their F.I.R.E. pursuit, Adam and Jillian instead opted to buy a small house for $50,000. That’s inexpensive even in a small rural market like Kalispell, Montana. But the price was that low in large part because it also had a flooded basement. “We bought the ugliest, nastiest home that would accommodate the family we were hoping to have,” Jillian reported. “Then spent five years remodeling it.”
It wasn’t a decision that came without consequences. They spent the first year just making the home livable, and a total of five years fully renovating it. And since the home is small by the standards of the local market, they were forced to get rid of many possessions they seldom or never used.
But as a result of the choice they made, and the sacrifices that came with it, the family is now comfortably housed in a mortgage-free home. And while housing is usually the single biggest expense for most households, it barely makes a dent in the Johnsrud’s monthly budget.
As a postscript on the house, Adam and Jillian spent an additional $30,000 for renovations. But today the home is worth close to $200,000, and there’s still no mortgage on it.
That was just the beginning. Armed with a practically non-existent housing expense, they continued to save. Just a few months after buying their first house, they bought and renovated a rental property – and later, a second – that now supply one of their three basic income sources.
Income generating real estate is a smart strategy. David Wilson is a Certified Financial Planner and real estate investor in San Diego, CA, and a big proponent of residential real estate investing. “People always need placed to live,” David maintains. “And unlike commercial real estate, if things get bad and your properties aren’t renting, you can drop your rental rate and almost always get your property rented.”
Being Out-of-Step with the Culture
Some people may be willing to buy a $50,000 wreck of a house to fix it and flip it for a profit. But far fewer would be willing to buy it as a place where their family will live. Jillian and Adam got some negative reactions for doing just that, especially as their family expanded when they adopted a sibling group of 3 kids. Almost everyone in their life kept asking, “So when are you going to move into a bigger place?”
And unlike a lot of young couples, they had to resist the urge to buy a brand-new car every few years. Then there were the restaurant meals and the expensive vacations they didn’t take during their F.I.R.E. build-up.
But these are the price nearly everyone has to pay on the road to financial independence.
Jillian was prepared to pay that price, and may have had a built-in advantage from an unexpected direction. “Growing up poor taught me I might have to work twice as hard, twice as long, and put up with a lot more crap just to make the progress,” she claims. “And I said, ‘OK, if that’s the price of admission, I’ll pay it’.”
The Income and Expenses of Early Retirement
To retire, the Johnsruds draw income from three sources:
Adam’s military pension, $1,450 per month
Rental income, $1,200 per month
The safe withdrawal rate of 4% is a foundational issue for all retirees, but especially for early retirees. “Many retirees have questions about how much of their portfolios can be withdrawn each year without running out of funds before they die,” offers Benjamin Brandt, CFP of Capital City Wealth Management in Bismarck, ND, and host of the Retirement Starts Today podcast. “Often times, retirees will look to the 4% rule for guidance, and only withdraw an inflation-adjusted 4% of their initial portfolio starting balance in retirement. Many retirees don’t realize how conservative this strategy really is, as 96% of 30-year withdrawal periods end up with more money than they started out with!”
The three income streams total $3,550 per month, or $42,600 per year. That’s well below the US median household income of $61,937 per year. But it’s more than enough for the Johnsruds, who are able to live on just $2,000 per month.
And because they’re able to live so far below their means, they can get by on just two of their three income sources. That enables them to continue to save an entire income source each month, to build their savings for the future.
They can live on that much money because they don’t have the typical financial burdens of middle-class life. There’s no mortgage, no student loan debts, no car payments and no credit cards. The Johnsruds are largely able to sustain their low-cost lifestyle because they avoid debt entirely.
According to Jillian, their core living expenses are just $700 a month. That includes:
Property taxes, $150
Homeowner’s insurance, $50
Cell phone, $60
Gym membership, $40
Miscellaneous expenses, $270
Over and above the basic monthly expenses, their groceries run about $700 per month, leaving them with $600 to cover whatever else they need or want. And fortunately, the family’s health insurance is provided by the military, as a result of Adam’s time in the service.
The Payoff of Early Retirement
With their combination of three steady income sources, and a low cost of living, Adam and Jillian are no longer tethered to 9-to-5 jobs. That frees them to pursue activities and goals that they want to pursue.
One of those activities is spending plenty of time with their children. Without the need to report to a job every day, Jillian and Adam are able to spend most of their days with their kids. That also means more time for school-related activities, as well as leisure pursuits.
A major early retirement goal for the couple was to be able to travel with their family. They do it frequently, which is helped by the fact that they keep their trips low-cost.
They love to travel to national parks, and recently spent 10 weeks visiting 10 different parks with their family. That’s one of the perks of early retirement – the ability not just to take vacations, but extremely extended ones. They own a camper, which eliminates the need to pay for lodging.
And while they’re away on vacation, they sometimes rent out their home to raise additional income. The income even covers the entire cost of some of their vacations.
The same frugality that benefited the Johnsruds when they were working their way toward F.I.R.E. is continuing to keep them comfortable now that they’ve achieved it.
And along the way, they been able to travel to 42 states, 27 countries, and even spent a full four years living abroad.
Those are the kinds of life enriching experiences that many people don’t experience even in traditional retirement.
F.I.R.E. Isn’t Necessarily About Traditional Retirement
One of the distinguishing qualities of F.I.R.E. is that it bears little resemblance to the traditional notion of retiring to a life of perpetual leisure. While leisure is certainly part of the package, the desire to produce and accomplish figures significantly into the mix.
Jillian has described this concept as Flexible FIRE. It involves a mix of activities and pursuits. For example, some weeks include leisure activities that are closely associated with retirement. The Johnsrud’s multiweek vacations are an example.
But other weeks they pursue income earning activities, mostly on a part-time basis. Then there are volunteer roles. For example, Adam serves on the board of a local low-income mental health facility, while Jillian serves on the board of the ChooseFI International Foundation that promotes financial literacy. And in still other weeks, they plunge into more significant projects.
That’s certainly been the case for Jillian. Once they reached financial independence, and cut the ties with their traditional jobs, she transitioned into entrepreneurship. She now coaches others on how to achieve the F.I.R.E. lifestyle her and Adam have attained.
Not surprisingly, there’s a robust market for that kind of training. She coaches people one-on-one, runs paid groups, host events and speaks all over the country. She currently coaches 30 people each month, most of whom are involved in some sort of work transition. It might be someone selling a business, growing or scaling up a new business, finding a new job, or even preparing for retirement
She tells her story on her blog Montana Money Adventures, with the motto “Helping People Custom Design Their Best Life with Passion + Passive Income”. In addition, she’s launching a podcast in January called Everyday Courage.
As is often the case, Jillian saw her income take off from her postretirement business activities. That’s not an unusual outcome when people begin pursuing their passions. In Jillian’s case, she’s teaching others how to attain the life she has. It’s a topic she’s an expert in, because she and her husband created the lifestyle from very humble beginnings.
“I had dreamed about being a writer or speaker, and just never thought that was an option,” Jillian confesses. “It only took becoming financially independent and leaving work life to find both.”
Jillian found becoming financially independent allowed her to explore and discover her best work, and to transition into entrepreneurship. And while that had nothing to do with what she was doing in her previous employment, it had everything to do with the life she’s been living for many years now.