JP Livingston is a retiree living in New York City. She lives frugally, and she and her husband and dog share a 325-square-foot apartment. There’s just one key factor that separates her from the rest of the retired population of NYC: She retired at 28.
JP (a pen name she goes under on her blog, TheMoneyHabit.org) graduated Harvard in 2009 and went on to work at an investment firm after graduation, but her investing interest was sparked long before college graduation.
“When I was 12, my dad gave me a copy of Rich Dad, Poor Dad. It ignited my interest in money management (I consider investing just one part of money management),” says JP. “It made me want to start my own business. I also got really interested in real estate investing and would sit at Barnes & Noble reading through everything I could get my hands on.”
Though she always had a fervor for investing, when she was at Harvard, JP didn’t seem like the type that would go on to work at an investment firm. She spent one of her summers at a Buddhist monastery in Taiwan. When JP reflects on her time there, you can see how she started to find a minimalist lifestyle appealing, and why she doesn’t equate spending to happiness.
“Going to a school like Harvard can sometimes make you feel like you have to pursue a certain kind of high-powered corporate life to be respected,” says JP. “I had been feeling a lot of that pressure and this experience helped. I remember one night we were visiting a temple in the mountains. I was laying on a very thin bamboo mat on a hard wooden plank at probably 4 a.m., staring up at the ceiling. All we had was basic food, a uniform, and peace and quiet, and I was happy, happier than I was at school many days surrounded by a smorgasbord of opportunities and privilege and leadership and all that. It reminded me that we don’t need much to live a happy life.”
Somewhat unsurprisingly, JP’s first job out of college was actually serving as a horse-trekking assistant to nomads in Mongolia. After that, she came back to the U.S. with plans to start her own business.
“But this investment firm convinced me that spending a few years learning about what made businesses successful as an investor would be totally in line with starting a business of my own one day,” explains JP. She was thankful that the company showed her that it wasn’t the right time for her to start her own business.
She continues, “I discovered I didn’t want to start a big business, at least not right then. I also had no idea at the time that the position [they were offering] would end up being so lucrative – it was actually the lower paying offer I had at the time. The compensation helped me achieve my dream of early retirement probably faster than starting my own business would have. And I got to work with some really great, smart people along the way.”
While the sizeable income really helped, JP still had to keep her costs living in the city very low, to accommodate an aggressive savings and investment plan.
She explains it like this:
Income — Expenses = Savings
Savings + Growth Rate + Post Tax Rate = Nest Egg
According to JP, “Saving vs investing happens sort of sequentially in my book. You have to get good at some part of equation one before you can move on to the second equation. That means you have to be good at either generating a lot of income or controlling expenses to build some savings first, and then you can turn your attention to juicing your growth rate or tax optimization strategies.”
For JP’s first couple years of working at the investment firm, she focused on cutting her expenses so she could save the bulk of what she brought in. She lived off $24k, paying $1,100 a month in rent and allowing herself $900 a month for any additional expenses (including basic needs, like clothes, food, etc.).
What does her financial picture look like now?
“My total net worth is $2.25 million. I’d say that about 60% of it was saving and 40% of it was investing,” says JP. “Today I live with my husband and dog. Instead of $24k per person, I’m living off $32.5k per person ($65k total). So our savings rate remained very high while I was working. My husband still works even though our nest egg covers all our expenses.”
She’s honed her investing strategy in the last few years, and has seen very impressive growth rates:
“There is a key threshold where the returns from your investments start to contribute as much as a full-time job would. I had my first million by the time I was 26. That year, it generated more than a 13% return. That’s $130k from my investments, whether I was working, sitting on the beach, or playing video games. At a threshold like that, spending an incremental hour working on my investing strategies or tax sheltering strategies would yield way more than figuring out how to shave another thousand dollars from my budget. So my attention has definitely turned more towards taxes and investment in the last few years [of work].”
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What really sticks out about JP’s early retirement story, beyond her net worth or her age, is that her and her husband live in New York City. Most early retirement stories come from people living in more remote areas, as opposed to the most expensive city in the U.S.
For JP and her husband, they prefer to live in New York City because of the amenities. They love everything the city has to offer. But sticking to their early retirement budget means cutting corners.
“We’ve sacrificed space and quality in order to keep costs contained. The three of us live in a 325-square-foot apartment on the fifth floor of a walk-up building,” says JP. “The floors are slanted; if you drop a marble on the ground, it will definitely roll on its own to the other side! It’s amazing how adaptable human beings are, though. Aside from having to buy a bed frame with adjustable legs, we’ve gotten used to it.”
They buy groceries on the cheap, either in Chinatown or at Trader Joe’s, and have picked up most of their relatively high-quality furniture on Craigslist.
“Selling my mistakes is easy,” JP adds. “I sold some computer parts in 48 hours because the density of the city leads to lots of demand.”
While the idea to pursue early retirement had already been etched in JP’s head (her parents were big savers, and had taught her that she needed to be able to support herself before allowing herself to pursue more creative endeavors), she says, “What catalyzed the actual decision to pull the trigger was an incredibly hard year of mortality scares among my friends and family.”
She dealt with her mother experiencing numbness is her body, which they worried would escalate. She also watched two close friends lose parents at a young age.
JP: “I was thinking about how many good health years I had left and how I wanted to spend them. Conservatively, based on my family’s health history, I assumed I had maybe 15-20 years of truly good health left. I had spent almost seven years as an investor. Did I want more of the 15-20 years of good health I had left being a professional investor? What was I really contributing there or was I mostly there for the money? Meanwhile, how many days did I truly have left with my parents? When was I going to go on the Europe river cruise with them we’d been talking about for years but which I kept pushing back because I couldn’t find four weeks of vacation time?”
JP started investing before she even left Harvard, at the age of 19. She worked at the investment firm for seven years. Not even eight years after her college graduation, JP no longer works, and has a net worth of $2.25 million. She’s done with the part of her life where she focuses on bringing in money.
“I don’t think I’d go back to a conventional 9-to-5 job voluntarily, at least not with pay in mind,” says JP. “I could see myself working again for someone else if it were work that aligned with what I wanted to contribute to the world.”
More Info: www.forbes.com