Ed Mills from MillionaireEducator.com joined me for an episode of the Financial Independence Podcast to talk about how he and his wife saved nearly a million dollars in just 16 years…on teachers’ salaries!
We get into some really interesting tax-avoidance and geographic-arbitrage strategies so if you want to learn ways to drastically increase your income and savings rate, this episode is for you!
- Using international and domestic geographic arbitrage to increase income
- How to save $250,000 in 3 years on teachers’ salaries
- Setting up SEPP 72(t) distributions to access retirement account funds before standard retirement age
- Going from $0 net worth to nearly $1 million in just 16 years
- Living off 457(b) funds while fully funding other tax-deductible accounts
- 2015 Free Money
- The Millionaire Next Door: The Surprising Secrets of America’s Wealthy
- Travel Rewards Coaching by RichmondSavers.com
- Cashing in on the American Dream: How to Retire at 35
- 403(b) Wise – How I Escaped My 403(b) by Quitting My Job
Today, I’m excited to introduce Ed Mills from MillionaireEducator.com. Ed and his wife are both teachers and they amassed nearly a million dollars over the course of just 15 short years teaching. So I know a lot of people who are out there thinking, “You can’t get ahead on a teacher’s salary,” but Ed and his wife just blew that myth out of the water.
He’s done some really interesting things to hit that number. He’s a big proponent of front-loading retirement accounts. I think this year, actually, him and his wife are planning to contribute over $100,000 between them to tax-advantaged accounts.
He’s also one of the only guys I know that’s done a 72t distribution. So I’m excited to talk to him about that to see how much of a pain that is because that’s one strategy to get access to retirement accounts prior to standard retirement age. So I’m looking forward to talking to him about that.
He’s also moved around quite a bit to increase his income. I know I talk a lot about geographic arbitrage in an international sense, having just come back from Thailand. I understand how beneficial it could be to move somewhere where the cost of living is a lot lower. But a lot of people e-mail and say, “I don’t want to leave the States” or, “I don’t want to leave Canada” or wherever you’re reading from.
So Ed actually did quite a bit of domestic geographic arbitrage and he used his moves to really ramp up his income and ramp up his savings rates.
So a lot of good stuff I’m excited to talk to him about, so without further delay, Ed, welcome. Thanks a lot for being here.
Ed Mills: Thanks for having me on. I’m honored.
Mad Fientist: So my audience may not know too much about your back story, so how did you get on this journey to financial independence and maybe start back at the beginning of your teaching career and just give us some idea of how that went and how you got to where you are today.
Ed Mills: Well, let me go back a little further and just say, I’ll be honest, I was a jock. I was a basketball player and I went off to college on an athletic scholarship.
Mad Fientist: A D1 player, right?
Ed Mills: Yes, I was D1.
Mad Fientist: That’s pretty awesome.
Ed Mills: It was a lot of fun, a lot of work and you’re always on a schedule. After college, I played a year in Argentina and a year in El Salvador. And in between that time, I got more free time and got to explore other interests and I ended up in language school in Guatemala and I actually did a month in Rio De Janeiro learning.
By a strange twist of fate, I became a Spanish teacher in spite of the fact that I could barely pass Spanish in college. I think I made three C’s. But when you have a college degree and you can speak Spanish, there’s a lot of interest in finding Spanish teachers, particularly in Georgia in the late ’80s.
So I became a Spanish teacher after being recommended by a teacher who was leaving. They wanted me to replace her and I took the job. And in all honesty, I took my first real teaching job at age 27.
Up to that point, like I said, I played basketball and I was traveling. I would go to school and pick up Spanish courses at St. George Estate or Kennesaw, knowing that at some point, I wanted to teach. At least I thought I did.
And at 27, I got my first real job. I worked that a few years and it wasn’t really great money. I think I made $18,000 my first year. That’s what you made in Georgia back then.
And once you don’t know what to do, what do you do when you don’t know what to do? You go to grad school, right?
Mad Fientist: Absolutely.
Ed Mills: Yeah. And at age 31, I went off to grad school and I got an MBA at Laredo, Texas, and I got a masters for Spanish and ESL education at Southern Miss. I made 33 when I graduated. I got a $20,000 student loan. My wife also has a $20,000 student loan, so we’re in the hole for 40.
About that time, I got a little nibble about a job in Saudi Arabia. I took it. I think I made $40,000 tax free a year and I had an apartment and the use of a car. So I got those checks and I was sending whole checks in on my student loan. I got out net worth up to zero at age 35.
So 35 is not young, it’s not really old, but as opposed to many guys that I read in the financial blogosphere, the financial independence and extreme early retirement, you guys seem to young and so clued in. I was the antithesis of that. I was a free spirit. I was like a drug-free hippie.
I just like to have fun. I can always find the party. And I just didn’t worry about tomorrow.
Well, tomorrow got there, and I was 35 and I was at zero at least.
Mad Fientist: That’s a lot better than a lot of people at 35, I think.
Ed Mills: Yes. I thought I was an absolute failure at the time, but I realized I could’ve really dug myself into a hole with more debt, which a lot of people do. I didn’t realize how pretty I was sitting.
I worked a few more years in Saudi. I think I was 38 when I left, after 9/11. And at that point, I think our net worth was about 100, maybe $110,000. We started teaching in Georgia.
I was really surprised that when I got back to the States, it was in 2002 and I started teaching and I think the first year, I made $54,000. I think my last year was 25, 26. And my wife was also – we took a job because our plan was to go overseas on the international school circuit and earn the tax-free money. But I think the first year together, we made $85,000, and I thought, “Wow! Teaching really pays a lot more here in the State of Georgia since I last taught here.”
Mad Fientist: Is that rare for Georgia? Is Georgia particularly good as far as income is concerned or is that…?
Ed Mills: In the South, yes, Georgia is one of the higher paying states. And I forgot when that salary move took place. I think sometime in the last ’90s, I believe. I forgot who the governor was. I was in Saudi at the time. I was disconnected.
I know a lot of people from other southern states will try to teach in Georgia because there is more money.
Mad Fientist: And that just happened to be where your family was from.
Ed Mills: Right! I grew up in North Georgia. My wife is from South Georgia. And we ended up splitting the difference. LaGrange, Georgia is where we live. It was three hours from both of our hometowns.
We’re thinking, “Well, I want to save some money for my retirement.” We knew about IRA and then I had a 401k when I was overseas through my US employer. They had a contract in Saudi, but that’s another story.
But anyway, I learned about a 403b and I thought, “Oh, okay. We have the 403b.” So I basically started investing with that 403b and right off the bat, since I already had money, I went and maxed it out for me. I also did for my wife and we funded our IRAs.
Some of your articles about front-loading, yes, we would start the year out January or February every year and just do whole checks like the whole check into our 403b.
So then whatever’s left, you divide it by 10 and you have a smooth check the rest of the year. So we always did that with our 403b and our IRAs, we’d lower them up as soon as we could.
Mad Fientist: So this was starting at age, what, 37 when you got back from Saudi Arabia?
Ed Mills: Let’s see. My first year teaching back here, I was 38 and my wife was 36. Like I said, we’re a little older at this point and net worth of 110. We’re saving hard though. But keep in mind, we’re thinking about, “We’re just going to just jump ship and go teach at an American school in Rio De Janeiro or something.”
We went to a job fair and we didn’t really like the opportunities that we saw and we went back to our old schools and stayed another year.
Well, two years turned into seven. During that whole time, we were saving or front-loading as you would say, our salaries. And along the way, somewhere about the 3rd or 4th year, I learned that the 457 that we had in our district. I funded that quite a bit also. Some years, I would fully fund it. Some years, I’d just take it down to a threshold where it would benefit me on my taxes.
Mad Fientist: Before we continue, for those out there that may not know, a 403b is pretty much like the non-profits version of a 401k. So it’s a pre-tax account. In a similar fashion that you put in pre-tax money and a grows tax-free and then your taxed on it when you pull it out. The 457 is similar, but there’s no early withdrawal fee and it is such a nice account to have that I thought I had the access to at my job, but then for some reason, there’s an income requirement from my employer and I didn’t make enough to contribute to it. I was devastated.
Ed Mills: Yes, I would be devastated too.
Mad Fientist: So yes, a 457 is like a 401k or a 403b except there’s no early withdrawal penalty, which is really nice for people planning on retiring early.
Ed Mills: Correct. And so, I’m trying to think when I first funded that. I believe the maximum was $15,000 on the 403b and the 457. Right there, I could put away 30,000 bucks and my wife could do the same.
We were really able to accelerate our savings. I just remember talking to my wife. I was like, “I can’t believe that we were able to save this much money.” My wife’s got an MBA too, but she doesn’t think about money all the time like I do. She’s very frugal. But the wheels keep turning on me and you can’t shut me up.
I would see here, I would show her. I’d make a spreadsheet and put it on the refrigerator and say, “Honey, this is crazy. We’re supposedly teachers. We don’t make any money, but look at this.” The bottom line is growing and we bought a house, a beautiful house in LaGrange. In my mind, I always thought teachers just don’t have any money. And then I was experiencing a different reality.
Mad Fientist: Right. So you’re both saving roughly 30k each a year and you’re making how much at this point?
Ed Mills: I guess after my wife got her full-fledged certification, we were over probably about 100 between us.
Mad Fientist: So that’s 60% plus savings – well, after tax, even better.
Ed Mills: I have a list here of my contributions from 2003. I started at 30,000 a year and by 2007, we’re up to 62,000 a year. It’s between – all these numbers are my wife and I. We’re a team and so when you see those numbers, it’s two people. It’s not one. But we live together.
Mad Fientist: Exactly! So at this point, you’re up to 60+ and you just can’t believe your luck with all of it coming in.
Ed Mills: I say these numbers not to brag, but just to give people an illustration. I guess around 2008, we’re almost $400,000 in net worth (from 2002 to 2008, six years, about six years of work). I’m thinking, “Wow! Since I’m not a millionaire and I’m not a trust fund baby, that’s real money to me.”
About that time, about 2008, 2009, all jobs, you get in a rut, you need a break and it was time for a change. And so I figured, “Well, I know these accounts and I know how to use them.” And then I realized, “I’ve got money in the 457 that I could use for current expenses.”
So basically, what we decided to do was max that 457 out at this job and then take other jobs. So we got our 457 up to $90,000 and then at the end of 2009 school year, we interviewed, took new jobs down in deep South Georgia, Echols County, a very rural county (not too far from the Okefenokee Swamp) and had a great time.
We went down there, had a very frugal lifestyle, and every account, we funded fully. And those three years down there from 2009 to 2012, we saved $250,000 on teacher salaries.
That was pretty much the plan. I made a spreadsheet once again and showed my wife. She said, “Let’s do it!”
Mad Fientist: That’s incredible. So this is definitely something I want to focus more on because I’ve written a lot about geographic arbitrage and earning money and dollars and then spending it somewhere cheaper and making your dollar go further. A lot of people e-mail me and they say, “What if I don’t want to leave America? I like America. I don’t want to go live in some tropical place in Southeast Asia or something. What if I want to stay here?”
And that seems to be what you did with this move. You went down there, presumably kept similar salaries and yet, you lowered your cost of living dramatically and really just ramped up your savings to an extreme level. Is that correct?
Ed Mills: That’s pretty much right. We really have a super cozy lifestyle in LaGrange, but we had the mortgage and all and we were able to rent that out. But rural Georgia, there’s not a lot of distractions. There is no clubbing or there’s no bar scene or places to go where you’re going to spend your money. We live basically in a rural house, $750 a month. We cooked most of our own groceries. We just lived a very frugal lifestyle, but it was very enjoyable. It was a great three years.
One of the things that really helped is that district did not have Social Security taking out the check. There are still a lot of districts in America where if the municipality voted not to participate, they were allowed not to. So not only did I not have to pay it, there was a retirement plan in lieu of Social Security that was 6% of my salary put in there that was 100% vested to me.
So that added that $250 I decided that $20,000 from that plan after three years.
And you were talking about geo arbitrage, I read Tim Ferriss’ book, The 4-Hour Workweek. That really jumped off the pages to me. And like most people, I always viewed geo arbitrage as country to country situation. And now, I realize, it can be county to county, state to state. I’ve got my eye on getting a piece of property in Florida and establish some residency there just for asset protection and no state income tax and access to Florida virtual school for my son in the future.
There’s a lot of shifting around or a lot of benefit to maybe moving.
Mad Fientist: Absolutely! And that’s something – I know your story and we’ll, obviously, be touching a lot more of it. But that seems to be a recurring theme. You’ve had no problems just picking up and moving to take advantage of much better opportunities elsewhere starting from Saudi Arabia to moving counties in Georgia.
It just seems like it’s made such a difference to what’s happened to you over the last couple of decades. Do you think that’s because you are so comfortable moving as you were a basketball player and that led into not feeling as tied down to a certain place? Or what do you think it attributed it to?
Ed Mills: Well, it’s funny. Being a basketball player in college, I didn’t get to have a junior year abroad like all my buddies. They did Spain and Italy and Austria. And I didn’t get to do that. Now, don’t cry for me because I got this to see a lot of America playing tournaments and what-not.
But I view moving and traveling, it’s an adventure to me and even within the State of Georgia – I’m not from South Georgia originally – moving to these towns and spend a year or two is an experience to me because this is a different way of life from even where I’m from in North Georgia.
So I’ve always had a sense of adventure and being curious. That’s just innate in me. I just view this as my late junior year abroad in a sense. We always refer to our three years in Echols like the year in Provence. It was rural Southern Georgia. It was fun. We have great memories of that place and we’ll probably have good memories of this place too when we end up leaving.
That said, even if I like somewhere, I know I’m going to leave it eventually because what I do with my money, it requires me to leave.
Mad Fientist: So let’s talk about that a little bit. You not only use it to improve your income and reduce your spending in the future, but you also make these moves to improve your investment options. So would you mind talking a little bit about that?
Ed Mills: Let’s say, in my last job in Echols County in South Georgia, I had this growing amount of money, which to me is a lot, say, $200,000 sitting there. And it’s in a variable annuity product with high fees. I’m not going to invest in a variable annuity product because it’s got fee certainty. I don’t want a 2% a year fee in addition to market uncertainty. Call me chicken. I’m just not going to do it.
So at some point, I need to move that money to my Vanguard IRA where I can control the cost.
So when that pot gets big enough and we decided it’s time to take a different job or maybe take a year off so we can, what they call in the business, separate service – it’s like I move my money. You have to quit your job to move your money. That’s the cruel reality. You can be in a great job, but if you want to move your money, you have to make a hard choice. You’re going to have to leave or just keep whatever vehicle you have.
I haven’t really talked about this a lot, but most of the 403b products I see at the K12 level are terrible. They have very high expenses. I’m just not going to do that.
Mad Fientist: And when you leave, you can move it to anywhere you want for Vanguard fund with very, very low fees or whatever you choose.
Ed Mills: Yes. I mentioned two basis points or 2 percentage points are 200 basis points. I think my admiral shares of total stock market at Vanguard are five basis points. So 200 versus 5, I mean –
Mad Fientist: No brainer.
Ed Mills: That’s a 40 to 1 ratio?
Mad Fientist: Yes, exactly.
Ed Mills: I’m not going to buy a loaf of bread for $40 when I can get it for a dollar.
I want to mention one other thing. You talked about the mobility. To me, to move is very natural. Like you said, I traveled and I played basketball overseas and what-not. My wife likes to travel. We do all these road trips. We have a good time doing it. But I noticed having moved to this small town in South Georgia now, my new town, people don’t quite know what to make of me. They’re like, “Why are you here?” And to me that’s an adventure. They’re wondering if this guy have a checkered past. No, I’m pretty normal but I am very tall.
But I always found that if you’re willing to move for an opportunity, oh, my gosh, there is opportunity and perpetuity. If you’ll go, there are jobs. But people get so locked into a geographic area or a career path. They think there’s no other option. There is always another option. It might not be in the county, it might not be in the state, but if you’re willing to pick up and go, you can get probably a better job than you have now.
Mad Fientist: Absolutely! And the very act of leaving has been hugely rewarding for me personally, at least in the power of quitting post. I read about every time I’ve left a job – luckily, my job, I can do from anywhere. Every time I’ve decided it’s time to pick up and move, it’s resulted in remote working opportunities, wage increases that I would have never gotten had I stayed still.
Yes, it’s just incredible. And then you get this whole another place that has opportunities you found you haven’t explored yet. So I’m right there with you.
Ed Mills: And you do have one of those careers. Maybe I’ll have to get my blogging career going for real.
I did another geo arbitrage, a little attempt I did. We all went last year to Mexico for six weeks. We went to Cancun. I figured Cancun will be very easy. First of all, I knew how beautiful the beaches are.
I got down there, it was beautiful. The infrastructure was much better than I remembered it. Even the Mexicans told me. So you’re going to notice there’s a big change in the people toward tourism. They realize that tourism is very important here and they’re really happy to see you. It was just a very positive vibe. I enjoyed my time in Cancun.
We got a one month rental on a little studio apartment and I tracked our expenses that month there and we spent $1550, three people. So that’s a little less than $19,000 if you pro rate that for the year. I don’t even know what I’m doing. I’m a newbie.
So if you have a frugal lifestyle, you can probably live anywhere in the world. But if you have frugal tendencies and you live in a low cost place to begin with, the combination, it’s powerful.
Mad Fientist: Absolutely! Having just spent a couple of months in Southeast Asia, I could not believe how low the cost of living was and yet, the quality of life was just so high.
But yes, Mexico is on the top of my list of where I want to be heading next to check out because I’ve never been down there. So I’ll be getting back in touch to get some recommendations off of you.
Ed Mills: Don’t hesitate.
Mad Fientist: Just to recap a bit. Thirty-five, zero bucks net worth pretty much. And then you built up over 100k in Saudi Arabia and then you come back to Georgia, worked for a few years, and then you make a move down to the Southern Georgia. And then you just really go into overdrive. So where did you go after that?
Ed Mills: Well, 2013, my wife and I took the year off and we home schooled for a year just so we’d have some flexibility and we could go visit relatives and take trips to Jekyll Island and go camping and visit people in Florida. It was just so leisurely. When you have time, you feel wealthy.
Mad Fientist: And it doesn’t cost that much.
Ed Mills: No! And we were living in our house in LaGrange and our house is beautiful. And cooking – just very low cost existence, but a high quality. I’m very big on using the library and we don’t have cable. We don’t have a lot of ongoing expenses, but at the same time, there’s no other way to say it, my life is awesome.
Like I said, I’m older. I’m from a generation where there were three channels on the TV. There was no remote control in the house. We didn’t get cable until I went off to college. We didn’t have video games.
I look at these things that a lot of people see today as they’ve always been here. To me, I just marvel at everything.
So we took 2013 off. And about that time, I guess our net worth was about a little less than 800 with the market going up and we’re not taking on any debt.
But last year, we’re not quite where we want to be quite financially. We were sitting good. But we decided, “Look, we want to do this to be a model for other people and we decided we’re going to take two years, possibly three years, and really full throttle down on the savings, go over the seven-figure mark, and then we’ll be the millionaire educator,” just slide the B’s, be down with it. Not that that’s the magical – well, you know, seven figures, it’s not what it used to be, obviously with inflation and what-not. But it’s a threshold. We just want to push through.
We started here what? In August of 2014? From August to December, we saved $46,000. After April, we’ve saved $35,000 more. And then I’m shooting to save $106,000 this year, and then whatever carries over to the remains of 2016, those eight months. I’ll probably do at least $8000 a month. So we’ll save $65,000.
Mad Fientist: Wow! So you’re still maxing out your 403b, your 457 for the both of you? IRA, HSAs.
Ed Mills: Yeah, I have an HSA. I started that my last year down in Echols County. I used elements – I used to be Eli Lilly, the credit union. They had AmeriTrade. HSA was a decent cost. I can get to low cost ETFs on AmeriTrade platform. I think I was looking at eight basis points in 36 bucks a year fee. And that was a problem, finding an HSA I can invest in.
Mad Fientist: A lot of people struggle with that.
Ed Mills: But I think I found something. It’s now called Elements Financial, I believe, or something to that effect. But you can find it on the internet. But yes, we have 457, 403b, IRAs, HSA, and I also do a savings account for my son. I’ve done every year since he was born. And that thing is growing tremendously too.
So those are my five. That’s usually the order I fund them in. I try to blow up the 457 first because of the flexibility element. Then the 403b because that’s more important than my IRA and I can always use my IRA. I can fund that over April the following year. The HSA is also very flexible. It goes to April the following year. And it’s saving as well.
So I always want to load up on that 457 and the 403b.
Mad Fientist: Nice, and do you do much taxable investing or is it all in tax-advantaged accounts?
Ed Mills: This is where I’m very terrible guest. Since my 100,000 from Saudi, I used that to buy a house and I eventually converted that to IRAs and what not, did a little switch. I have a $1000 that I opened up in a Vanguard account, probably about two months ago. But I got to get the ball rolling on that. I am totally, for the most part, pre-tax.
Mad Fientist: Nice. That’s definitely what I focus on first. I just actually last week finally set up automated investing for my taxable account because that’s the only thing that I still hesitate. I do stupid things that I shouldn’t do, but I can’t help it. So I finally bit the bullet and was like, “I’m just going to set up the automated thing and just let it keep popping out of my account every month and be done with it.” But, yes, focus for me as well. It’s just all on those tax advantaged accounts too.
Ed Mills: And I learned from your blog that – I used to think, “Am I crazy to do this?” I looked down the road. I am going to do some ROTH conversion ladders. I want to do that.
Mad Fientist: You’re also doing the 72t distributions, aren’t you?
Ed Mills: Yes. A lot of people wonder, “How do you live?” Like I said, I do a 72t distribution.
Mad Fientist: Could you talk a little bit about that because nobody knows anyone that actually has done one and it does look quite complicated. So would you mind just to go into that a bit?
Ed Mills: There is 72t.net. That’s a site I came across where they had a lot of information on that. And then what it is it’s a substantial equal periodic payments. 72t is part of the IRS tax code, I believe.
Mad Fientist: You said 72t.net?
Ed Mills: I think it’s 72.net, I think. I believe that’s the site.
Mad Fientist: I’ll look it up and put it on the show notes anyway.
Ed Mills: I view this as a way to – I had this big IRA that I couldn’t do anything with. How do I use it? Well, this provision allows for – your IRA, basically, you annuitize it. You take a certain amount of payments out per year or per month, however you want to do it, but it’s basically your life expectancy and the IRS has an interest rate you use depending on when you start it.
I would look at that and it looked so complicated. Then I went to the IRS site and read about it. And I could take my financial calculator and put the numbers that they’ve got and make them work.
So once I figured out that, the fear went away and I did it. I remember when I showed my accountant, he looked at it and he’s like, “Wait! Why are you doing this?” I explained it to him. And a lot of time, your CPAs aren’t very familiar with this. We have filed since and this has not been a problem and he feels a little better about it.
But yes, it’s nothing illegal. It’s just not used often. If I were an athlete with a lot of money, I talk to an accountant, I blew all my money, I’m sure that’s what a lot of athletes used to get current spending money with this provision, this 72t.
Mad Fientist: My plan is hopefully to do most of it in the ROTH conversion ladder. So I hopefully have enough time to get it all converted potentially at low cost, but I definitely can see why a 72t would be a good choice. How has it been for you?
Ed Mills: It’s been good. We’d take about a little more than $18,000 a year between us from our accounts. We have to take that every year.
Mad Fientist: How old are you, Ed? Sorry, I didn’t cover that yet, I don’t think.
Ed Mills: I’m 51.
Mad Fientist: Fifty-one, okay. And when did you start the 72t?
Ed Mills: I believe I started it in 2013.
Mad Fientist: So you got plenty of cash in there.
Ed Mills: Yes, three withdrawals from it. And I keep probably a little too much cash – three, four years’ worth of cash just in case there’s a crazy market crash. And within that IRA itself, I have all dividends and capital gains paid to the cash automatically. That’s probably a lot of detail.
But one of my big fears was what if we have a real market – oh, man! I have to sell these stocks at the bottom to get my – because you cannot change your distributions. So that said, I like to keep three to four years’ worth of cash provisions within that IRA.
Mad Fientist: What else are you invested in because we haven’t even touched on that and we’ve been so excited about the different accounts you’re going into. Where’s your money invested?
Ed Mills: The vast majority of my money is at Vanguard. My investment philosophy is very simple. I like low cost index funds. I’m partial to target retirement funds. For big chunks of my money, I think I’m paying 17 basis points, the allocation is set. It gets less risky the older I get. They take care of that adjustment as I get older. It’s an underlying portfolio of index funds. It’s like a financial adviser already built in it in a sense.
Mad Fientist: Yes, it’s hard to beat.
Ed Mills: Right. For funds, I use Life Strategy Funds, that same thing except these aren’t shooting for retirement date. They’re a set fixed allocation that don’t change. For example, I believe they’re along the same lines about 17 basis points.
And within Vanguard, I have chunks, certain amounts, total stock market at five basis points. And around that margins of my portfolio, I might rev it up with a little more international, some small cap, I’ve done that. This past year, I went and optimized my IRA. I made sure all those accounts like my REITs and what-not had at least $10,000 so I could get the lower fund cost. I take Buffet’s view, “I’m going to hold those in forever, let them just keep paying me.”
Mad Fientist: Especially now that your 72t distribution is going to let you live in Cancun, which I think is pretty good.
Ed Mills: Oh, yeah. It’s 18 and I’d think, “Geez! Eighteen, you can’t get very far in the States at time for a family.” And I know what it did for me in Cancun.
In addition to that 72t, bear in mind, I have my 457 that I can pull from strategically. So let’s say, I need instead of 18, I need 40 this year – let me use the figure 43 because that’s something I’ve written about on my blog, the ‘Figuring out Your Free Money’, your standard deduction.
When I added those up, I just couldn’t believe these numbers. “Oh, the government lets me earn this amount of money, but they want to tax me? What a country. What a deal!”
And then my 43 represents the free money which is standard deductions, personal exemptions for three people, my child credit added back in and then the remainder of the 10% bracket.
So on $43,000, I pay $850 federal tax, which is a 1.9 effective tax rate, federally.
Yeah. And here’s something I really got to say. People complain. They bitch and moan about taxes all day long, me included. But stop complaining. Do something about it. The government allows for you to do this. It’s not illegal. It’s in the tax code and it’s encouraged because when you’re older, you should be able to take care of yourself ideally. And that’s why the government set it up.
Mad Fientist: It’s amazing to me because people, they’ll spend time watching CNBC and try to actually do research on individual companies and things, but then they’re not even taking advantage of free 401k employer matching or any of the accounts or anything. You’re trying to eek out an extra whatever half percent on the market and you’re risking so much when you’re not even taking the free money on the table.
Ed Mills: I was looking at something the other day, 100,000 bucks and you save a whopping 20%, which is good. Twenty thousand and then you make 20% on that, you invest it like Buffet. Well, you make $4000. I’m just looking here at my sheet. I saved – for example, $91,000 in 2012, my wife and I.
Mad Fientist: That’s crazy.
Ed Mills: That’s what I’m saying. Mr. Money Mustache wrote a great article on it. If you haven’t read him, please, you’ve got some background reading to do, everybody. How he phrased it, the power of savings. It was a great article where he basically showed Warren Buffet humbled because you can out-save what you can get on returns. And that’s pretty much the strategy I have going too here.
Mad Fientist: As Jim Collins from JL Collins NH says, “The savings rate will just erase so many of your little mistakes along the way that it doesn’t really – you can get a lot of things wrong and yet still come out on top if you just save, save, save.”
Ed Mills: Well, I’m proof of that. I’m not always the sharpest pencil in the box, but I know how to set up my contributions to 403b and 457.
Mad Fientist: Right! And you went from, in 16 years, from age 35 to 51, from zero to nearly a million between you two. That’s just incredible.
Ed Mills: In that time, it was not a life of deprivation, of miserly penny-pinching. We took a one month trip to Brazil and we travel. We go to the beach every summer. We have a very nice life.
Mad Fientist: Let’s focus a little on the income again because you’ve done quite a bit throughout your career to increase your teacher’s income. Obviously, you hear all the time in mainstream press that teachers are barely getting by and here you guys, thriving completely in all manners of the word.
So you said that Georgia itself was pretty good as far as relative wages for teachers, but can you talk a little bit about what else you did help increase those wages throughout the years?
Ed Mills: Yes, if anyone’s ever read the Millionaire Next Door, you know that the late Dr. Stanley wrote about playing offense and playing defense. Well, teachers don’t have a lot of ways to generate extra income, but there are ways. The biggest thing I noticed when I looked at the pay scale is that – when I first started working, I had only a master’s degree. I had two master’s degrees as well. If I got my next degree, a specialist degree, which is roughly nine more courses, I would earn $6000 more a year, $500 a month, every year until I stop teaching.
And so I got into that program to become an administrator, not necessarily to be an administrator, but I knew I could basically study my way to a pay raise and after a few course, I told my wife and said, “Honey, there’s no one here that we work with that could not will themselves through this course work.” So that was her queue. She jumped in.
So we both did it. And so now, consequently, we get a $1000 more a month which, as I like to tell people, if you earn that thousand, that’s not your money, that is IRA money, 403b money, and we’ve religiously parked that in our various accounts.
Another thing I did – and I did all seven years in LaGrange, and I was a little younger then and I could do that. I could do this. What I would do is extend a day. What that meant was I did not have my planning period. I taught four out of four block classes. That meant an hour and a half for each class. I taught all that time with no break other than a 30-minute lunch break. And I’ll be honest, that was very tiring, especially after seven years of it. But it paid me 25% more on my base.
And everybody would always say, “Why do you do that?” And I’m like, “Well, because it’s 25% more.”
Mad Fientist: A 25% raise, that’s pretty hard to come by.
Ed Mills: Yes, exactly. I always joke around and tell people, “Yes, I’m turning academic tricks here. Give me this one more class.” Also, I was the assistant basketball coach and assistant Cross Country coach and I did things of that nature.
My wife’s been a technology student association leader and FBLA leader for business clubs and they have stipends. When you get those things, put them on your side of the ledger. They don’t go to the tax man. They don’t go to your state income tax. They go to your side of the ledger, your accounts.
I don’t want to come across as a hippie. We live in a consumer society. People are conditioned to spend. I’m a catalyst, but even I – now, I look at it and it’s like, “Oh, when I see commercials and it’s sell, sell, sell, buy, buy, buy,” it drives me crazy.
When you’re talking to your co-workers and your friends and your relatives, a lot of times you get this, “Wow! These people are a strange vibe because we’re doing something different. But the numbers, they just jump off the page. It’s like, “Wow! I wish more people would do this” because it’s not about the money and anybody said that, they’d probably the first people to tell you that, it’s the freedom and the choices that lead to exponentially, at least in my case, increased happiness.
Mad Fientist: Things you can’t even think of or wouldn’t have predicted before. Exactly! There’s so much opportunity that just happens when you have the freedom to take it.
Ed Mills: Our discussions are like, “Oh, when we stop teaching, we’re probably driving. We’ll load up the car and go to Quebec and I’ll work on my French.” I speak horrible French. It’s really bad. I’d like to go to Quebec and just slaughter some French and work my way through it. And what better way?
But most people, if you’re tied down to a job, you can’t even entertain this thought. I’m dying to go to Thailand, dying to go to Thailand. I’m going to Brazil. And these things are going to happen. A lot of it, thanks to you, with all your travel hacking posts. I got tired of watching you have all the fun. And other guys like Brad over at Richmond Savers, I’ve learned so much from you guys on that.
Mad Fientist: It’s amazing what you can do. Absolutely amazing!
Ed Mills: I’m a millionaire in that regard as far as miles and hotel points. And I’ve been doing it for a year.
Mad Fientist: That’s crazy. Those things will go so far, especially if you’re talking to Brad about how to use them and things like that and reading up on all the blogs. It’s just absolutely incredible.
Ed Mills: When you have a little financial leeway, you can take the time off to go do these adventures. And my son, he’s nine years old. He talks every day about that trip to Cancun. And now, he’s asking, “Dad, what are we doing next? We got to go to Texas, Brazil or Puerto Rico?” because he’s heard us tell our stories and he’s getting fired up. I love seeing that fire in his eye to travel and see the world.
Mad Fientist: That’s so good. So let’s talk a little bit about in addition to Quebec and maybe Cancun somewhere, what does your post-fi life look like?
Ed Mills: Well, more travel. I can see myself by a small, manageable, what I would refer to as a crappy house in Florida, something within proximity to the beach, bike-able to the library and the grocery store, preferably. I’ve been taking, like I’ve said, trips to various places and I can see myself doing some slow travel – two to three, even six months, depending on what we’re going to be doing with our son.
A lot of family visits. I’m from a big family, so is my wife. We’ve got lots of nephews and nieces. We like spending time with everyone.
A simple life, but I also see a lot of adventure mixed in there. That adventure will be frugal adventure because just because you’re overseas doesn’t mean you got to spend every dime.
I noticed in Cancun if you’re up on the main beach, wow, the cost. If you want to spend all your money, you can do it in a couple of hours. But you don’t have to fall prey to that trap. Just find out where the locals go and that’s where all the real fun is anyway, we all know that.
At this point, I’m envisioning FIRE as a little more travel. But my wife and I are the kind of people where we can entertain ourselves. I like to read, I like to work out, jog, things of that nature, a little more blogging. Eventually, I’m going to put this out there and try to shame myself into doing it. I’ve got this half-written book, The Millionaire Educator: How to Build Wealth on a Teacher’s Salary. It’s been for years so I forgot what Churchill said about a book. The first is a mystery and then it’s a tormentor. I just have this nagging voice in my head, “You loser!”
But it’s going to be fun. I have fun already and I just expect more of it.
I will say this (and maybe other people have bumped up against this). My first year, I took off from work. My wife took a job and I had about six months off by myself. That was a little strange being by myself when my wife went off to work and I took my son to school. I’d prefer to have the whole family together.
But even that said, I worked on a lot of things and I sure was in great shape. I had the best six pack in my life at the age 47, which was shocking.
I do a lot of self-experiments. I read Tim Ferriss and I’m really into things like that.
Mad Fientist: Any very successful ones?
Ed Mills: Well, I started that slow carb diet six years ago and I lost 35 pounds in 10 weeks. And so now, I experiment with ketogenic diets and intermittent fasting. I’m a human guinea pig, which makes me even weirder. Of course, you can’t shut me up. I love to talk about this stuff.
Mad Fientist: No, that’s great. I usually ask all my guests right before we finish, if there is one piece of advice that you had to choose to give someone starting on this path, what do you think it would be?
Ed Mills: Well, I wrote a few things, but this one’s overlooked. First realize, internalize that financial independence is possible. It is doable. There are so many social narratives today about how bad it is.
I’m not saying everything is perfect, but I would imagine most of the people listen to this podcast or reading your blog, if they don’t have a college degree, they’re quite capable of getting one. And when you look at the unemployment rate for people with a college degree, it is single digit. That doesn’t mean you’ll have an ideal job, but when you get that job, use that opportunity to grow your salary somehow, maybe start a business in the side.
But you need to know that it is possible to become financially independent. And I think that the easiest way to do that – and a lot of you guys have written about this, is that when you play offense, generate income, and you save it and you learn it to cultivate a low cost, frugal lifestyle, which can be very awesome, it’s almost fool proof.
And this is what I wish I knew in my youth and this is why I’m so envious of all you young 20, 21, you 9-year-old retirees.
Mad Fientist: I wish, not quite.
Ed Mills: I was clueless. But that said…
Mad Fientist: But you still got there
Ed Mills: Yeah! And that’s the reason I do write. “Okay, you screwed up. There’s no such thing as time travel. We can’t go back and fix it. If that’s the case, learn the best way to get you where you want to be. And that’s going to be generate some offense either through a job, save the heck out of that money, use those pre-tax accounts and you can live really well.
We live in a first world country. America is a great place to live. You can live great on $1500, $2000 a month and I’m talking from a perspective of a family of three. You take out my mortgage, I’m sure I can live on $2000 a month, for sure, probably $1500.
But you can do it. It’s possible. Just stomp out all that negative energy, “This is the worst ever.” No, in a lot of ways, it’s some of the greatest times ever to live in.
Mad Fientist: Absolutely. It really is. There’s actually a really, really funny Louis C.K. skit. He was saying just how absolutely amazing everything is in the world these days, but all people do is complain about it. So he’s like, “The best stuff ever has been created, but it’s all on the worst people because everybody is just complaining about everything and just looking at the negative. It’s just an incredible time to be alive.
Ed Mills: And I guess I need to say this. The way that we’re set up in developed countries is that if you don’t take your business and set yourself up, you can set yourself up to be – these are strong terms – a debt slave, a tax slave. The more you earn, the more you’re going to pay. If you’re taking everything and then all you do is complain, “I pay so much in taxes.” Take control.
I don’t want to be beholden to people. I like my freedom. And I understand we go to pay taxes and things. I’m sure. I go to public library like all you guys and I drive on the road. I do want to contribute.
But if you don’t set it up for you, someone else is setting you up. I didn’t mean to make it – that sounded good, didn’t it?
Mad Fientist: That was really good. You should patent that. That was really good.
No, that was absolutely amazing story. I really appreciate you taking the time to talk with me about it. Is there anything else that you want to touch around or anything I missed before we sign off here?
Obviously, everyone can come and see you at MillionaireEducator.com. Is there anywhere else that would be good to get in touch with you? Or just go over there?
Ed Mills: Yes, MillionaireEducator.com. I have an e-mail sign-up list that I’m trying to work with still. If I don’t get back to you real quick, just bear with me.
One last thing I want to mention. I want to mention someone who was a great inspiration. I think many people would like to read this book. Paul Terhorst, T-E-R-H-O-R-S-T, Cashing in on the American Dream. I refer to it as a dated yet timeless classic. The information, the how-to of how he retired early doesn’t work anymore. He was getting 8% on CD. So you’re not going to get that, but man, just the way he worked the problem, a lot of you would like that book. And I have to say, when I read that book, it was a thunderbolt.
I knew I wanted to go overseas, but I always knew that I had to come back to earn a living. This guy got me thinking as to how to blend the overseas fund and fund it with my own money.
So I feel a debt of gratitude to him. I’m so glad he wrote that book because that was my shove. I just think a lot of people would like that book.
I just like to say also to all the guys who are writing all these great content out there, I want you to know, I really appreciate it because you’ve made me think of things in a way I might not. Just keep cranking it out. That includes you, okay, Brandon?
Mad Fientist: Thank you very much, Ed. It’s incredible. Every time I talk to someone new in this community, I’m just blown away every single time. So many different angles, people are tacking it in and so many different ideas that are just – it’s always so exciting to meet new people. We’re all really lucky to have such intelligent people to bounce ideas off of and get great ideas from, so I couldn’t agree more.
And Paul Terhorst, there’s been at least a handful of people that have asked me to try to get him on the show. So your recommendation of his book has prompted me to add that to the top of my list again and see if I can get in touch with him because I’ve only heard great things.
Now, I’ve not actually read the book, but I will link to it on my show notes and I will be trying to pick up a copy as well to see how good it actually is. It sounds pretty amazing.
Ed Mills: You’ll enjoy it.
Mad Fientist: Excellent! Well, Ed, thank you so much again. MillionaireEducator.com. Go take a look, say hi. I’m going to link to some of my favorite articles of his. And yes, it’s been an absolute pleasure. So I really appreciate it.
Ed Mills: Thanks for having me on.
Mad Fientist: Take care. Bye.
Ed Mills: Bye.
Mad Fientist: I hope you enjoyed my interview with Ed. It’s really incredible what you can do when you really just put your mind to it. It’s obvious that Ed and his wife made savings a priority, so they took every opportunity that came to them.
And that’s I think the key. You just have to put yourself in a position to get opportunities and when you get them, you just have to take advantage. Ed and his wife have definitely done that and really saved an impressive amount of money over the last 15 years.
So hopefully, you got a lot out of this interview. I know I did. But yes, thanks to Ed and thank you guys for listening. And I’ll see you next time.