How to Retire Early

What is retirement?

Simply, retirement is nothing more than time.  When you are saving for retirement you are buying time, and when you are in retirement you are paying for the time.  The greater the amount of time the greater the cost.  The good part of retirement time is that you have a lot of control over the cost of this time.

Traditional teachings for retirement savings tell us to work for a lifetime, save as much as we can, and then when we retire mathematically figure out how many years we can survive and on what income.  More modern planning techniques have people make financial plans, so they can figure out much of this upfront, and act accordingly in order to meet their plan if they can stick to it.


Retiring early is focusing on what you can control.  Here’s why.

You have more control over your spending than you do your income.  What and how much you choose to spend on your expenses is, in most cases, a decision you make.  Housing costs, car payments, food, clothing, and other necessities are items that you make choices on daily.  The quantity of consumption of these items is up to you as the consumer.  

When it comes to your income there are other factors involved than just you.  For instance, you may be an employee, so your company chooses when and how much to increase your income.  If you’re self-employed or a business owner, your customers or clients decide when to buy your services or products, which has a bearing on your annual gross income.

Why how much you spend matters more than how much you make.

To make this point easier to comprehend I’ll use an extreme example.  Let’s say you earn seven thousand dollars per month in income after taxes.  If you spend two thousand of that income on expenses, and save five thousand dollars of that income every month for a year you’ll have saved sixty thousand dollars by the end of year one.  If you do this for five consecutive years at the end of the fifth year you’ll have saved three hundred thousand dollars. 

If you’re spending two thousand dollars per month at the end of one year you’ll have spent twenty four thousand dollars.  With three hundred thousand dollars saved at the end of five years, if you quit your job and cap your expenses at two thousand dollars per month, you’ll be able to live for twelve and half years before you run out of money.

The carry over from learning to live in this manner is when you reach retirement maintaining the same expense cap won’t feel like a sacrifice.  You’ll be used to living in the manner for which you have been living, so there won’t be much of an adjustment versus someone that has to cut back in order to maintain their retirement. 

Not controlling your spending can be dangerous.

Using the above example, if you reverse it and spend five thousand dollars per month, and only save two thousand dollars per month, at the end of the fifth year you’ll have only saved one hundred and twenty thousand dollars.  With your monthly spending being five thousand dollars per month, or sixty thousand dollars per year, you’ll only be able to live two years before you run out of money if you quit your job.

Why this concept is so powerful.

This concept of expense control not only allows you to choose the cost of your time, but applies to almost everything we do, including operating a business.  The most successful businesses of today are excellent at controlling their expenses which is shown by the large amounts of cash they have in the bank.  This concept allows a person or a business to outlast problems out of their control, and gives them time to sort out the next step to take in times of trouble. Whereas those with high expenses during times of turmoil face ruin and few options to manage their way past the hurricane.

Managing expenses is hard.

If controlling your costs and living minimalistic was easy, everyone would do it.  The challenge is that most people like the luxuries in life and enjoy nicer things.  Yet, managing your expenses is about buying freedom.  When you have to work you put your future in someone else’s control, and you risk your freedom to choose where you want to be and when you want to be there. 

There’s a lot more.

Inflation, investing, retirement income, and other ideas are all a part of this topic.  What matters here is understanding what should be priority when planning for retirement.  Your spending and expenses today are the cost of your retirement time in the future, so act wisely.  Otherwise, you could suffer the ills of having to work through old age instead of living it your way.

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