The secret to early retirement

22 12 2015

Well, OK, I have to agree that it’s almost certainly too late now for anyone to ‘retire early’ in the accepted meanings of such words and in the current economic state of affairs. I literally retired aged 42 following the demise of my until then profitable photographic business. Instead of doing this by saving money, as this site suggests, I did it by investing every penny I made into good real estate, selling it, and downsizing.

Even at the height of the greedy eighties, we never led an extravagant life. While other photographers I knew were leasing Ferraris, I leased a Honda Integra. Instead of running a flash studio in elitist suburbs, I ran mine from home, and built the whole thing myself. I’ve also always been an energy miser, and have abhorred waste, and all that helps saving money in its own ways.

I was prompted to write this essay after reading an article on Vox about some young man who decided to quit his job aged 28…. even younger than me! That article led me to the early retirement calculator at the link above…

If you are spending 100% (or more) of your income, you will never be prepared to retire, unless someone else is doing the saving for you (wealthy parents, social security, pension fund, etc.). So your work career will be Infinite.

If you are spending 0% of your income (you live for free somehow), and can maintain this after retirement, you can retire right now. So your working career can be Zero.

In between, there are some very interesting considerations. As soon as you start saving and investing your money, it starts earning money all by itself. Then the earnings on those earnings start earning their own money. It can quickly become a runaway exponential snowball of income.

As soon as this income is enough to pay for your living expenses, while leaving enough of the gains invested each year to keep up with inflation, you are ready to retire.

If you drew this on a graph, it would not be a straight line, it would be nice curved exponential graph, like this:


Working years vs. Savings Rate (screenshot from

The part I want to point to, however, is the frugal living bit.

A middle-class family with a 50k take-home pay who saves 10% of their income ($5k) is actually better than average these days. But unfortunately, “better than average” is still pretty bad, since they are on track for having to work for 51 years.

But simply cutting cable TV and a few lattes would instantly boost their savings to 15%, allowing them to retire 8 years earlier!! Are cable TV and Starbucks worth having two income earners each working an extra eight years for???

The most important thing to note is that cutting your spending rate is much more powerful than increasing your income. The reason is that every permanent drop in your spending has a double effect:

  • it increases the amount of money you have left over to save each month
  • and it permanently decreases the amount you’ll need every month for the rest of your life

So your lifetime passive income goes up due to having a larger investment nest egg, and it more easily meets your needs, because you’ve developed more skill at living efficiently and thus you need less.

Now that I can relate to! “Skill at living more efficiently” also stands for living more sustainably. Just the other day, I gave away my old rideon mower to my brother in law (who has zero idea on how to do anything…). He watched in utter amazement as I got the old girl going again after three years of no use. His handyman skills are non existent. He and my sister in law have totally squandered their retirement funding, because even after I told them how to build their house they totally ignored everything I said to them, and now they complain their house is freezing in Winter and stinking hot in Summer. The result will be expensive power bills they can’t afford… And the rideon mower? It will almost certainly not be used, as it looks old and he’s turned his nose up at it….

Their car was recently written off in an accident entirely not of their own doing, but instead of buying the cheap and economical Honda Jazz I suggested, they bought a six cylinder thirsty car they don’t need. I’m afraid that when the shit hits the fan, these two will really struggle, but I’m over helping people not prepared to help themselves.

The Mustachian continues with:

If you want to retire within 10 years, the formula is right there in front of you – simply live on 35% of your take-home pay**, which is approximately what I did without even realizing it during my own younger years. The only reason Mustachians will remain a rare breed, is because this article will never appear in USA Today. (Or if it does, people will be too busy complaining about how it can’t be done, rather than figuring out how to do it)

The reason such articles would never appear in USA Today is that of course, should everyone do this, the economy would instantly crash, and we can’t have that now, can we…….?

If you’re still earning an income, go for it, it can be done. Good luck!




5 responses

22 12 2015

Great post. Here in Florida I see people convinced that property boom 2.0 is in full flower. I’m a bit less sanguine, and plan on selling my paid for bungalow soon for approximately 4x the 1997 purchase price. People ask, “but where will you go?” Well, seeing as Tasmania doesn’t really want any more Yanks, I’m opting for the trailer park up the road a bit, where the maintenance fees for water, sewer, and trash will run me $108 a month. Tack on another $75 for electricity, and I’m in business, (or out of business I should say).They also ask me “can you get insurance for a mobile home?” My response is, who cares, if it blows away, I’ll just buy another one.

I’ll also add that saving my money in the form of gold and silver coins (kookaburras, eagles, etc.) has forced discipline upon my program as no stock, bond, or savings account ever could. Electronic trading has made it just too easy for me to liquidate assets at exactly the wrong time, although perhaps it works well for others less impetuous than me.

22 12 2015

Furthermore if you learn to live frugally, forced frugality is not as great a hardship. People who have grown used to spending every cent of their hundred thousand plus income have a very hard time on sixty thousand let alone what the dole provides. It is even worse if you have debts.

23 12 2015

For me living frugally has given me some of the most sincere moments of freedom my life has ever experienced. It has brought me closer to the sacredness of nature without the clutter or flashing lights, constant noise & the constant tyranny of mechanical junk.

My father was born 6 months before the outbreak of WW2 in the UK & had to grow up in an environment of scarcity. When he moved moved to NZ as a young man scarcity & frugality was instilled in him & so my sister were born into that situation.
Use it up, wear it out, make do or do without was the motto of our family.
I thought all families lived like us until I, not even 21 years old moved to Australia & I got to meet folk who squandered energy & money with abandon. To this day I still live with my old dads lessons.

Affluence & cheap energy has made industrial humanity with money to burn soft & inflated with a sense of self entitlement. They will suffer a double shock as the derailing of the global death culture continues.
Firstly they will be angry & upset at the loss of their disposable income & all the material plastic crap that came with it & secondly they won’t understand why it’s gone as the mask of delusion is wrapped so tightly around their psyche it cannot be removed.

Far better, I think to have little & live with the wonder of the universe?

24 12 2015

We visited Scotland in 2004. I observed they had everything we had in the States, they were just lived more compact. We could’ve sold our 1200 square foot home for $183,000 and bought a McMansion @ $300,000, but decided to live Scottish. Now debt free. Only maintenance and taxes. The goal – own the ranch. Now most are renting money, pretending to own. Odds are they’ll never be able to payoff the loan.

26 12 2015

I ran across the MMM site about three weeks ago and am about half way through it. It is US centric but a lot of it can be put to use anywhere.

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