One of my more financially interesting friends is my friend Jay (not his real name). While the rest of us are beginning or in the middle of our “real” careers, Jay still works as a bartender at the same restaurant he worked at while we were in college. He recently turned 30 years old, and if my calculations are correct, that means he’s been working as a bartender at the same place now for 8 years (longer if you count the summers that he worked there while in college).
Bartending always seemed like it was supposed to be a temporary stop. My friends and I all graduated college in 2009 – right in the midst of the financial crisis – and found ourselves unable to get any “real” jobs. I worked two minimum wage jobs and lived at home with my parents. My other friends did similar things. One friend worked at a sporting goods store. Another worked at a golf course. Some people worked at restaurants – typical post-college jobs that you’d expect a 22-year old to have to take after the worst financial meltdown in a generation.
After a year or two in these jobs, we all moved on to try to start our “real” careers. A bunch of people grabbed internships in hopes of getting their foot in the door somewhere. Others went off to grad school. As you can probably figure out, I went off to law school in an attempt to escape the financial crisis. Jay just stuck with bartending.
Whenever we talk about Jay from a career perspective, the thought is that he’s still in this pre-career phase, just waiting to start his “real” career. He’s 30 years old now and he can’t be a bartender forever, right? Most people imagine that he’ll open up his own restaurant one day and that’s sort of the direction he’s been leaning as well. I’ve always thought, instead of trying to “start” his career now, maybe he should just consider retiring.
Could A Bartender Really Retire At 30?
So is it really possible that a guy who’s been bartending for his entire working career could really be in a position to retire at age 30? Theoretically, I think yes.
As a caveat, I have to admit that all of the numbers I use here are an estimate. Like most people, Jay doesn’t talk about money with his friends very often. And even though I love to talk about money on this blog, I can’t just go around asking people how much money they make or what they’ve got saved up. The primary purpose of this post is to use it as a thought exercise and to help us think outside the box.
With that said, I do know two things that are definitely true about Jay:
- He doesn’t spend a lot of money.
- He saves a ton of money.
How Much Does He Spend?
Let’s address point one. How much money does Jay spend? Honestly, I don’t know. I’ve never asked him, but I can estimate based on his lifestyle that he probably spends no more than $1,000 per month. A friend of mine that is currently living with Jay thinks he might spend even less than that – maybe $8,000 or so per year. For now, I’ll just assume that he spends about $12,000 per year, which I think is a fair assumption based on what I know about him.
$12,000 isn’t very much money to spend per year. Then again, I know there are people out there who spend even less than that per year. (Jacob Lund Fisker from Early Retirement Extreme comes to mind, clocking in a yearly spend of just $7,000). I’m sure there are other people out there who are able to spend $12,000 or less per person.
Obviously, with such a low estimated expenditure, we have to ask how is he able to spend so little money. I see three things that allow him to do this:
- Rent. The main thing that accounts for his low spending is that he has never had to pay any rent. Like most of us that graduated from college during the financial crisis, Jay moved back home after college. A few years later, his parents moved to California, and Jay was asked to stay at home and take care of the house. That means that, since 2009, Jay has never paid any rent! Admittedly, not all of us are so fortunate to be in a position where we can live in a house for free. Remember, this is just a thought exercise to help us think outside the box. Plus, even without rent, a lot of us probably still; couldn’t make it through a year spending $12,000 or less. You have to have a certain mindset to get through a year spending so little, even without housing costs.
- Clothes. Unlike many of us, Jay also doesn’t buy a lot of stuff. He never buys new gadgets. He drives the same car that he had in high school. And most importantly, he never buys clothes. Seriously, he still wears the same clothes that he wore back in high school and college. The last time I saw him buy anything expensive was a Groomsman suit he bought for a friend’s wedding. And that’s still the same suit he wears to other people’s weddings today.
- Food. Jay works in a restaurant, so he gets to eat basically for free on days that he works. When we visit him at work, he’s nice enough to hook us up with food too. Obviously, not all of us get this benefit, but I bet you have more opportunities to use your work benefits than you think. When I was working in big law, I basically would eat for free during the summer by going out to eat with every summer associate I could find (the firm reimbursed us if we had lunch with a summer associate). During times without summer associates, I would look around for CLEs and get free food there.
How Much Does He Save?
With Jay’s low annual expenses, in theory, he wouldn’t need all that much in order to technically be financially independent. Using the 4% rule, a $12,000 per year annual spend means Jay only needs to save $300,000 in order to be able to live forever off the returns. And the great thing is that with his investments only generating $12,000 per year, he’d basically pay no income tax on his investments ever.
So could Jay have $300,000 already saved up? I think he could or isn’t too far from it. I know that back in 2009, he had $50,000 saved from a combination of working during college and money his parents gave him. Given that he spends so little and assuming he makes about $50,000 a year at work (which sounds about right – I know back when we graduated college, he was making about $40,000 a year with his tips, and presumably, he’s earning more now), I think I could see him saving well over 50% of his income. Saving $30,000 per year for him wouldn’t be a crazy assumption. If we add that up from 2010 to 2016, plus the $50,000 he already had, he could be sitting on $230,000 right now. And that’s assuming he never received income from any other sources or invested a dime of his money.
It gets pretty crazy if we assume that he actually invested that money. Saving $30,000 per year comes out to $2,500 saved per month. If he invested that money into an S&P 500 index fund since 2010, he’d be sitting on about $432,000 today (I calculated that using this calculator from DQYDJ.com). Using the 4% rule, he’d be able to pull out $17,280 per year. At a more conservative 3%, he’s only taking out $12,960 per year, still more than enough for him to sustain his current lifestyle forever.
What We Can Learn From Jay
I know, the usefulness of this post really depends on whether the assumptions I made are true, and honestly, I have no way to know unless Jay was willing to share that information with me.
And yes, I know that realistically, he’s probably not in a position to retire early. He’s not going to be able to live rent-free forever. One day, his parents might sell his house or he’ll have to go find a place to rent. His expenses might rise one day too. Who knows? It’s just another option that he could consider and probably has never even thought was possible.
As for lessons, I think there are three things that we can learn from Jay:
- Buy stuff you care about. Don’t buy stuff you don’t care about. This is such a basic thing when it comes to money, but it’s pretty hard to do in practice. We’re trained to think that we care about a lot of stuff. But when you really think about it, we probably don’t care about as much stuff as we think. Jay doesn’t buy clothes because it’s not something he cares about. He’ll spend money on sporting events or on going out with friends because that’s something he does care about. Look in your closet and see how many clothes you never wear. I know my closet is packed with clothes I never wear now. What does that tell me about what I actually care about?
- Ignore what other people think. Easier said than done obviously, but Jay has done this. He’s not embarrassed that he wears the same clothes from high school or that he doesn’t buy fancy stuff. Before you think he’s depriving himself, he’s definitely not. He still goes out with friends and has fun. And he does travel too.
- Be patient. I think this is really key. A lot of people are in such a hurry to start their lives off that they don’t think about what they really want to do. I know I probably hurried off to law school a bit too fast. I felt this pressure to get started because people kept telling me that I needed to get started right away. Jay has spent almost the last decade building up his savings. He’s been hearing people from all different sides telling him he needs to start doing something with that money. Someone with a different mindset might have thrown that money down on a house or something else that would tie them down. Instead, Jay’s taking the time to figure out what he’s going to do.
I know that Jay probably would never retire now, and he probably shouldn’t yet. It’s just interesting to think that it could potentially be an option for him. The important thing is at least he put himself in that position. Most people don’t even give themselves that opportunity.
Do you guys have a friend like this who spends almost nothing and seems to be in a position that they could retire early, basically by accident?