- Sam Daugen retired from his job as a vice president at Credit Suisse in 2012 after more than a decade of diligent savings.
- He planned to live off passive income from investing in stocks and real estate.
- After giving birth to her two children, Dogen hopes to return to work to meet her family’s financial needs.
This essay is based on a conversation with Sam Daugen, 46, of San Francisco, and has been edited for length and clarity.
Ever since I was a child, I didn’t want to be poor. I had lived in five countries before settling in Virginia, USA, and I saw a clear dichotomy between the rich and the poor. I wanted to understand how people made money and live like the rich.
I studied economics at the College of William and Mary in Virginia because it was the cheapest option.
After graduating, in 1999, I got a job as a financial analyst at Goldman Sachs on Wall Street.
My first day at the office was a 14-hour shift, and the first month was exhausting and stressful, and I realized I probably wouldn’t be able to work on Wall Street for another 40 years.
I was making $40,000 a year paying myself twice a month. If I invested 50% of my income for 20 years, I would have at least 20 years of savings to live on. I could work until I was 42, then take 5-8% of my savings, stocks, and real estate income each year and live until I’m 62. I’d be secure for life.
It was easy to save money because I worked a lot.
I started saving just a month after I joined Goldman Sachs. Every month, I invested half my paycheck in the S&P 500 and a few tech stocks, and 5% of that in a general savings account.
Following advice from someone in HR, I maxed out my 401(k) – paying less tax was better for my savings goals, and the company also offered a 401(k) match.
I was able to save a lot of money because I was very frugal. During my first two years at Goldman Sachs, I lived in a studio apartment in Manhattan, paying $700 a month in rent.
One of the benefits of working after 7pm was that I had access to a free cafeteria, where I could eat dinner and take home leftovers for the next day. It also allowed me to stick to my spending budget.
It was a plan born out of misery: I was working 60+ hours a week, every single day.
A promotion and a move to San Francisco helped me move up the ladder to buying real estate.
In June 2001, I was hired by Credit Suisse and moved to San Francisco. My base salary jumped to $85,000. With my new income, I started saving 60% of my monthly paycheck into long-term CDs, which are savings accounts that offer a high fixed interest rate and cannot be withdrawn for a set period of time.
In 2003, when I was 26 years old, I decided to use the money I had earned and saved from 1999-2003 to buy a two-bedroom apartment in San Francisco.
My goal was to diversify my assets from stocks to real estate. I used 80% of my savings and liquid investments to put a 25% down payment on a condo. I lived there with my then-girlfriend, who covered some of the costs.
By age 27, I had been promoted to VP at Credit Suisse with a six-figure salary and expected bonus increases. In 2003, 2004, and 2005, I saved and invested approximately 70% of my after-tax income. In 2005, I purchased a $1.52 million home in San Francisco and rented the condo until I sold it in 2017. I used up all of my savings and investments to buy the home. It was a big risk.
The 2009 financial crisis reduced my net worth but launched my blogging career
I continued with my savings plan until the housing and stock markets crashed in 2009. Although I wasn’t laid off during the crash, I lost 35-40% of my net worth in the six months that stock and real estate prices crashed.
To help me heal, I started a blog called Financial Samurai in 2009. The more I wrote, the better I felt because I was able to connect with others who were experiencing the same insecurities on their path to financial independence.
In October 2011, at age 34, I was making a base salary of $250,000. Credit Suisse was undergoing some staff reductions during the Global Financial Crisis. I spoke to the head of HR and was told there were more cuts to come. This was my exit to early retirement. I spoke to my manager and asked him to consider letting me go with severance and deferred pay if I stayed on to train my junior colleagues.
By April 2012, I was laid off and received my negotiated severance package. It was scary, but it also felt like winning the lottery. The package covered my projected living expenses for many years.
Retired at age 34
I retired at age 34 with a net worth of about $2.5 million after saving and investing 50-75% of my income for 12 years. I was earning about $80,000 a year in passive income from rent, stock dividends, and CD income. I continued to save 50% of my income and lived on $40,000.
In my last working year, I saved about 80% of my income, so the adjustment to living on less was not that big; it was more the increased freedom I had. After retirement, I realized I didn’t need as much money as I thought I would to be happy.
My wife also retired in 2015. She is three years younger than me and planned to retire by 35.
When she retired, we had to pay for her full medical benefits, which were not subsidized and cost about $1,680 a month in health insurance premiums.
Having kids has eaten up a lot of our passive income budget.
When our son was born in 2017, we started using more of our passive income. When our daughter was born in 2019, we used even more of our passive income. Now, for our family of four, we pay $2,500 per month in unsubsidized health insurance. Preschool costs per child have risen to $3,200 per month. We are now using almost 100% of our passive income.
I feel like I made a mistake in retiring early. I’ve been unemployed for 12 years and I know I need to save and earn more to increase my passive income. I never thought I’d have two kids after working so hard for one.
My wife and I had hoped to retire early and live on less than $100,000 per year. However, our annual expenses are now over $250,000. We decided to have two children and stay in expensive San Francisco, and we are now paying the price.
I’m looking for a part-time technical consulting role.
I committed to being a stay-at-home dad until my kids were in school full time, and now that my second child starts school in September, I’m considering returning to work part-time.
I would love to do part-time consulting for a tech startup in San Francisco, where technology and AI are thriving.
Looking back, I retired too early at 34. If I could retire again, I would have stuck it out until 40. But I don’t know if I would have had better health or been able to have children. I was so stressed out at work.
My challenge now is finding meaningful part-time work. Earlier this year, I tried a part-time consultancy job at a fintech startup, but it became all-consuming and interfered with my duties as a father. At least I know what to look for this fall when my daughter starts school full-time.
