My plan for early retirement

James blogs at Free in Ten Years where he documents his path to an early retirement. He is planning to retire at 38 by saving 75% of his income by being a frugal machine. He blogs about money saving ideas, investing and avoiding consumerism.

I am planning to be retired from paid work within ten years; on or before my 38th birthday.

I have an average income for my country and started this process with a moderate amount of consumer debt. I was in a very typical position for someone my age, although had the considerable benefit of having a full-time permanent job and a partner in the same position with the same interests in frugality and travel.



Photo Credit: TheAlieness Gisela Giardino via Flickr

The blueprint for early retirement

One of the paradoxes of early retirement is that it is extremely easy to lay out a plan that simply has to work if it’s followed properly, but very hard to implement.

Any plan that relies heavily on not just spending less than you earn, but spending a tiny percentage of what you earn is going to be difficult. It requires bullet-proof will power, sacrifice and a willingness to be different.

My plan is very simple.

  1. I try to spend less than 25% of my salary
  2. I invest the difference
  3. I wait until my investment income regularly surpasses my expenses
  4. Early retirement in ten years!


How do you live on 25% of your wage?

There is no magic bullet and no way to be driving a brand new BMW as well as saving 75% of your wage unless you are earning mega-bucks. For those of us on normal incomes there are a whole raft of sacrifices that need to be made.

A good start is to try to avoid lifestyle inflation which is the uncessary increase in spending to match an increase in income. If you have lived as a university student then you know it’s possible to live on next to nothing – and also that it’s quite a fun way to live.

You just have to not care that you don’t have the same material possessions as your co-workers.

Here’s a few major ways to save money:

  1. Live close to work
  2. Own a used car, or don’t own one at all
  3. Ride a bicycle
  4. Buy used clothing
  5. Don’t eat takeaway at all!
  6. Bring your lunch to work
  7. Eat more vegetarian meals
  8. Cut your own hair
  9. Watch less television (to avoid advertising)
  10. Swap expensive hobbies for free alternatives

There are of course many other ways to save money, but these are some of the most effective.


Won’t people judge me for being so cheap?

Most people won’t even know. The reality is the most people are far too busy worrying about themselves that they won’t even notice that you’re bringing your lunch to work. Or that you’re a bit sweaty in the morning from your ride into work. You can dress these up in other ways if you like.

“I’m bringing my own lunch because I’m trying to be healthy.”

“I’m riding to work to get fit.”

It is really important to learn the difference between being cheap and being frugal, and it will go a long way to hiding what you’re doing from other people if that is important to you. Buying many very cheap disposable containers is not nearly as frugal as buying one high quality container that you reuse. Similarly it is normally worth investing in quality knives, pots and pans so that you only have to buy them once.

A $40 hammer bought once is cheaper than a $10 hammer bought 5 times.


Why would I want to quit work so early? Won’t I get bored?

Just because you reach the point of financial independence doesn’t mean you have to quit work.

Work for as long as you want to after that point, but you can do so knowing that you can stop at any time. You know that if your boss becomes totally unbearable you can tell him or her where to go. With the complete freedom of knowing you could never work again and be financially safe.

It allows you to work for charitable organisations without worrying about money. It allows you to travel for as long as you like. The options are endless!

If you like the idea of waking up at midday, pursuing a dream without the worry of how you are going to pay your bills or just enjoying your best years how you see fit rather than at work, you owe it to yourself to consider retiring early from paid employment.

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