How to retire in 6 years as a Barista

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Matt3121
Posts: 28
Joined: Mon Sep 09, 2019 7:45 pm

How to retire in 6 years as a Barista

Post by Matt3121 »

I couldn't really figure out what forum I should put this on, but I think this is good motivation if someone is really wanting to retire early so I figured I'd post it here. Obviously this is in the midst of all the COVID stuff which puts things into question, but since I am promising about 6 years to retire as a barista lets go back 6 years ago roughly.

I was always super inspired by Jacob doing the posts on how to retire on Minimum wage or at least low wage jobs. But I kinda wanted to take it to the extreme and see what I could do. So I literally went and tried to find a scenario, as a barista, where you could retire as soon as possible. I'm thinking of this sort of as a story in a sense.

Anyway, let's get started. Let's say someone is 18 (obviously this is extreme, and not many 18 year olds will do it, but it's great that it's possible). They have no money currently and need to leave their house in a few months after graduating high school. The other assumption is that they are going to get a job as a Barista at Starbucks and work full time, and will make $9 an hour. I've talked to a few Starbucks workers and they generally say full time is doable, though you may have to grab shifts where ever they can. Certainly Starbucks employees can make more than this but we're going to pick a relatively low paying state.

Location: Crossville, TN

I'm picking this state because there is no state income tax, but it also has a lower cost of living. It's mostly random, I have never been to this town. But it's got some good points to it. There are 2 starbucks in town, so between the two, if you are a hard worker then full time work seems possible.

Pay: $9 an hour, 40 hours a week, 50 weeks a year = $18,000

After tax that is about $16,000 a year or $1,333 a month. So that's what we are working with.

Lets look at some realistic expenses.

Housing

It's pretty easy to find rooms for rent for $400 or so. Sometimes less. In fact I found a room for rent there for $100 a month, and it was pretty nice actually. It's small and you are in a trailer but it really was pretty nice.

Food

Next is food. So lets say $100 a month for that. You have to just stick to eating staples like rice, beans, etc. But part of the reason you work at Starbucks is that they give you 1lb of coffee free each week if you work there. Many also give you 1 free food item per shift. So you will get a lot of food for free and be able to add things to your diet. If you are doing ERE on a low budget job your best bet is working at a food place. Even at SB it's possible when the food gets thrown away you'll at least know where to dumpster dive if you really need to get some extra nourishment.

Transportation

Well we all know how this is gonna go. No car, just a bike, or walking. Costs are relatively negligible. He can walk until he can afford a bike, then when he gets one he can ride it around. Crossville is a small town, he can definitely rent a place that's 5 to 8 miles (MAX) from Starbucks. Probably a lot closer. Very easy on a bike.

Other Costs
  • Health Insurance: 100 (He's young and can afford a catastrophic plan, I think SB offers a health plan so if that's cheaper he can run with that but for now lets go with this one).
  • Cell Phone: $50 a month. He could go cheaper but a cell phone is basically a requirement these days, plus it'll give him good internet access. There are a lot of providers who give decent packages for this amount of money. Likely most of the time he can life off of wifi where he's renting and wifi at starbucks obviously.
  • Clothes: $50 a month. Kinda explains itself. I don't personally spend that but lets say for work clothes and personal clothes he spends about that much.
  • Random: $125 a month. This is for the random drs visit, or money spent eating out, whatever comes up.
Total Burn: $825, Total Savings: $525mo, yearly $6,300

Awesome. Obviously we aren't close to our goal yet, but lets get our expenses down. First things first though, let's take the first 6 months savings and leave it as a rainy day fund. Now is when the table is going to turn dramatically. Lets buy a house!!!

Lets buy this one:

https://www.trulia.com/p/tn/crossville/ ... 2041612352

It's a 3 bedroom, 1 bath. It's a whole lot of house for 70k! It's also only 4.5 miles from starbucks. Very bike/walkable. We're going to violate Jacob's rule and get a mortgage. Even worse we're going to only put down 3%! That's 2100, but 1k for closing. So by the end of our first year we're going to own this house (possibly sooner if the person doesn't mind not having a big rainy day fund).

Now his new monthly cost is going to be

$485 (Principal & Interest: $332 + Property Taxes: $23 + Home Insurance: $75 + Mortgage ins. & other: $55)
Plus lets say 250 for utils. Total $735. He could do less but here's why it's so high: He's going to rent 2 of the rooms out for $400 a month himself.
$800 in income - $735 in costs = +65. So he's turned his costs from 400 a month in expenses to 65 in profit.

Cool lets now recalc his monthly rate

Total Burn: $360, Total Savings: $990, yearly $11,880

That's a pretty huge turn around. He now has his expenses ultra low. Yes he does have room mates, but so do most younger people. In this case he could maybe rent 1 room to a family member and 1 to a co worker.

Now at his current savings and burn rate he needs to save about 100k to be able to pull out the 4% a year he needs to live. That will take about 6.5 years, and, well he's the impatient type. So what does he do... he pays his mortgage down instead. Every year he's paying off 12k of it. Which in 5 years would be 60k. Now we're 10k short! BUT! when you factor in he's paying down the mortgage every single month, so he's going to be paying less in principle each month and therefore will have extra money to pay towards the mortgage.

Once the mortgage is paid off, you don't pay that or the mortgage insurance. So that will be a savings of $387.

Summary after owning the house

Total Burn: $-27, Total Savings: $1,377, yearly $16,524

So assuming he continued to work, all his expenses would be paid and he'd be saving free and clear 16.5k a year. In the years he worked there he could have gotten a free degree from Starbucks, since they pay for it. Or lets say he wanted to start a lawn mowing business. He could work a few months, buy a cheapo truck, a mower and go mow some lawns. His expenses are so low he really can't fail. Literally he could cut lawns for 10 a pop and come out far ahead of what he was making at starbucks.

Sure life comes up and he maybe had other expenses he didn't count on, but even if that pushed him back a few months that would have been super quick. And if he preferred to go the save up the money and invest rather than pay off his house then it would have probably taken him about 7 years, But then he'd have 100k in capital he'd have access to.

More interestingly a Triplex sold there for 130k he could have bought.

https://www.realtor.com/realestateandho ... 75?view=qv

Now if he's 24 and he wants to get married and his new wife to be doesn't want to live in the house with others, no big deal. Build a tiny house out back or buy a RV like Jacob and rent out the other room. Extra 400 a month in income.

So yeah, this is my motivation. I think it's so cool that a person could be this frugal and retire so early. When kids are just getting out of college in a lot of debt and stressed over their future this guy has it pretty well under control and can do what he wants with his time.

Write the great american novel, start his own business, whatever he wants.

Frugal FTW

sky
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Re: How to retire in 6 years as a Barista

Post by sky »

It's fun to think about this type of scenario. Sometimes I think I would like to go back and do things again, knowing what I know now. It's also good to know if I lost everything today, I could rebuild my life, and probably in a better way.

2Birds1Stone
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Re: How to retire in 6 years as a Barista

Post by 2Birds1Stone »

Yes, it's definitely doable. House hacking is something I really wish I got into 5-8 years ago. Now as a nomad it's no longer as easy/possible.

A high savings rate is an amazing tool in the war chest, as is being less reliant on money to solve your problems/needs/wants.

Matt3121
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Re: How to retire in 6 years as a Barista

Post by Matt3121 »

@sky Yeah, it's the same here. I've already reached my retirement goal. I'm happy I did, but I wish I had known about this earlier. Especially when people way "It's so expensive, if you make 40k you'll never be able to retire. And that's true if you spend a lot but if you are REALLY frugal it can be done on much less. The person who can earns 40k can accelerate this soooo much faster.

Frita
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Re: How to retire in 6 years as a Barista

Post by Frita »

sky wrote:
Sun Mar 22, 2020 5:27 am
It's fun to think about this type of scenario. Sometimes I think I would like to go back and do things again, knowing what I know now. It's also good to know if I lost everything today, I could rebuild my life, and probably in a better way.
This.

Laura Ingalls
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Re: How to retire in 6 years as a Barista

Post by Laura Ingalls »

That house is so cute. And I am in love with the property taxes. :lol: The hiking would be awesome too.

Without getting too negative I suspect I am more among my people in a lot of other places. I already have neighbors with noisy coon dogs in my midwestern college town locale and am afraid East Tennessee might be a step backwards.

Cool reverse engineering :mrgreen:

Matt3121
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Joined: Mon Sep 09, 2019 7:45 pm

Re: How to retire in 6 years as a Barista

Post by Matt3121 »

Laura Ingalls wrote:
Sun Mar 22, 2020 2:13 pm
That house is so cute. And I am in love with the property taxes. :lol: The hiking would be awesome too.

Without getting too negative I suspect I am more among my people in a lot of other places. I already have neighbors with noisy coon dogs in my midwestern college town locale and am afraid East Tennessee might be a step backwards.

Cool reverse engineering :mrgreen:
Haha it's not my place either, I mostly picked a state that is somewhat poor to see what was possible. I'm definitely not going to live there haha (no offense to Tenn, it's beautiful there)

classical_Liberal
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Re: How to retire in 6 years as a Barista

Post by classical_Liberal »

I feel for all the people who are paying a premium to live in places that provide a better "lifestyle", and now they aren't able to take advantage of all those entertainment, weather, socialization outlets they are paying for. If I'm gonna be stuck at home, I'm glad my housing cost is so low!

Matt3121
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Re: How to retire in 6 years as a Barista

Post by Matt3121 »

classical_Liberal wrote:
Sun Mar 22, 2020 9:05 pm
I feel for all the people who are paying a premium to live in places that provide a better "lifestyle", and now they aren't able to take advantage of all those entertainment, weather, socialization outlets they are paying for. If I'm gonna be stuck at home, I'm glad my housing cost is so low!
Yup. That's the funny thing. Now that I live in a much cheaper place and don't have to work I have all the benefits of enjoying all those things.

ffj
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Re: How to retire in 6 years as a Barista

Post by ffj »

I've been to Crossville and it's a nice little town and you would be very close (drive wise) to a plethora of State and National Parks as well as larger cities including Nashville. Tennessee is very similar to Kentucky so I would fit right in, and yes it's a beautiful state.

Your model is very doable if one stays focused and makes intelligent daily decisions. Ride a bike, learn to cook, shop at grocery stores such as Aldi, side hustle for extra cash, grow a garden. Another benefit of such a lifestyle is that people notice you have your shit together and will offer to help, because it makes them feel good. That's one of the best kept secrets out there, that people really like to help, and if you show any initiative opportunities will arise, be it job offers or other acts of kindness.

7Wannabe5
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Re: How to retire in 6 years as a Barista

Post by 7Wannabe5 »

Nice in theory, but highly unlikely our frugal barista will qualify for this mortgage with 3% down. Another instance of why the poor stay poor. I was in a similar situation when I was young and the only way we could get financing was land contract with 10% down and that was in the easy credit era.

Frita
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Re: How to retire in 6 years as a Barista

Post by Frita »

7Wannabe5 wrote:
Fri Apr 03, 2020 11:17 am
Nice in theory, but highly unlikely our frugal barista will qualify for this mortgage with 3% down. Another instance of why the poor stay poor. I was in a similar situation when I was young and the only way we could get financing was land contract with 10% down and that was in the easy credit era.
Unless our barista has parents and/or grandparents who give or loan the down payments. The transfer of wealth is real.

The great thing with an ERE philosophy is training any offspring. My teen is already saving up for a down payment, would totally have it for that house, and gaining the diy and money management skills. Of course, he could choose to adopt a different lifestyle; we’ll see.

7Wannabe5
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Re: How to retire in 6 years as a Barista

Post by 7Wannabe5 »

@Frita:

Absolutely. That is how my DD28 and her new husband were able to buy.

Frita
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Re: How to retire in 6 years as a Barista

Post by Frita »

@7Wannabe5
Excellent, I am glad your daughter is using and benefiting from your expertise to get into their own place. Not having to unlearn is huge.

Augustus
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Re: How to retire in 6 years as a Barista

Post by Augustus »

I think we're seeing right now how fragile it is to be an unskilled laborer. In general I recommend being a skilled laborer.

Frita
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Re: How to retire in 6 years as a Barista

Post by Frita »

Augustus wrote:
Fri Apr 03, 2020 3:46 pm
I think we're seeing right now how fragile it is to be an unskilled laborer. In general I recommend being a skilled laborer.
Being any type of wage slave makes one vulnerable.

Matt3121
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Joined: Mon Sep 09, 2019 7:45 pm

Re: How to retire in 6 years as a Barista

Post by Matt3121 »

7Wannabe5 wrote:
Fri Apr 03, 2020 11:17 am
Nice in theory, but highly unlikely our frugal barista will qualify for this mortgage with 3% down. Another instance of why the poor stay poor. I was in a similar situation when I was young and the only way we could get financing was land contract with 10% down and that was in the easy credit era.
I don't think that's accurate. Why would they not qualify? It's a 70k house and they are a first time home buyer so they should be able to qualify. Frugal barista earns 18k, which is about 1/4th of the price of the house. That'd be like earning 100k and getting a 400k house. Not that extravagant. A friend of mine was earning 50k and bought a 300k house with only 3% and got a super low interest rate (less than 4% I think).

Seems doable. I agree that the poor do stay poor for reasons like this though.

Matt3121
Posts: 28
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Re: How to retire in 6 years as a Barista

Post by Matt3121 »

Augustus wrote:
Fri Apr 03, 2020 3:46 pm
I think we're seeing right now how fragile it is to be an unskilled laborer. In general I recommend being a skilled laborer.
I don't think anyone even very skilled laborers are immune. I know a lot of software developers that have lost their job and aren't finding anyone hiring.
Ultimately I think that's why living lean or being able to flex to learn is important.

Because ultimately if things go badly everyone is going to have to be lean anyway.

thrifty++
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Re: How to retire in 6 years as a Barista

Post by thrifty++ »

Its definitely doable in USA where housing is so cheap. My god I am shocked at that house. I would love to live in a house live that. Crazy.

Don't know about those food plans though. I don't think I could ever eat a diet consisting mostly of rice and beans. I don't that's healthy and could lead to health problems and lifestyle issues. I think in order to be healthy the food budget might need to be turned up to incorporate greater variety of fresh produce and occasional lean meats. Once one has their own home and garden I guess it could be reduced again.

flying_pan
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Re: How to retire in 6 years as a Barista

Post by flying_pan »

thrifty++ wrote:
Sat Apr 18, 2020 8:59 pm
Don't know about those food plans though. I don't think I could ever eat a diet consisting mostly of rice and beans. I don't that's healthy and could lead to health problems and lifestyle issues. I think in order to be healthy the food budget might need to be turned up to incorporate greater variety of fresh produce and occasional lean meats. Once one has their own home and garden I guess it could be reduced again.
Fruits and produce on sale is abundant and pretty cheap as well.
Cooking from scratch and not eating meat and diary would reduce your food costs significantly, you don't even need to budget it hardly, just buy what's on sale and cook from it.

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