Can you really retire in your thirties?

For most of us, retirement seems like a long way off, being well into your 60s or 70s. But what if retirement could be earlier, much, much earlier?
Early Retirement FIRE thirties retire
Photo by Joshua Earle on Unsplash
To many it sounds like a dream, win the lottery, come into an inheritance from a long lost relative, and never have to work again. Having not so recently tipped into my thirties, I was intrigued by an increasing online community who are trying to get to FIRE (Financial Independence, Retire Early) in the same decade of life. It’s a group of people who are dedicated to building up as much money as quickly as possible in order to retire as soon as they possibly can.
And many of these savers have been very successful, here are a couple of examples
  • Mr Money Mustache was one of the original thinkers in this area, managing to retire from his day job at the age of 30.
  • Steve Adcock retired in 2016 at the age of 35 from his job in IT
  • Tanja Hester retired at 38 a couple of years ago, from her job as a political consultant.
  • More recently Ken Okoroafer earned enough to become financially independent at 34!
There are many others, the Guardian has recently featured an article which introduces more.
So clearly it is possible. There are real life examples of it. Ken has even contributed to this blog- so he must be a real person! But how have they done it? Is there some kind of secret?

The method

Here’s the recipe for success, broken down into steps.
1. Reduce your expenses.
2. Do well at your job.
3. Earn more money on the side.
4. Invest/pay off debt with the difference
5. Hit your target and retire

That sounds relatively simple. Lets look at the separate parts in a little more detail.

1. Reduce Your Expenses.

The first key element is to minimise the amount that you need to earn to get by. The less that you need to live on, the more every £1 you earn will stretch, and the sooner you can reach financial independence.

This isn't cutting out the odd latte though. It's generally a little more drastic. It's making sure the key bills in your life are as low as possible. Small house, small, economic car (if at all- try cycling!) and avoid borrowing as much as possible. Choosing to go without many of the trimmings of modern life, not worrying about keeping up with the Jones. Living simply and enjoying the best things in life for free. 

This is actually far more powerful than increasing your income, because for every £1 you cut from your expenses, that is not only £1 that you can save, but its also money that you don't have to save up for in the future.

2. Do well at your job.

Earn money doing your job. Most of the people listed above had a fairly well paying job to start with, worked very hard, and whenever the pay rise or promotion came, the extra went straight into savings. Your day job is likely to be your largest source of income, and therefore the higher that you can push it, the quicker you can save. That's asking for promotions, moving employer to earn more money, doing overtime where possible. Actively looking to progress in your career, as quickly as possible.

3. Earn more money on the side

Your main job will likely contribute the largest portion, but there's plenty of scope to earn more on the side. Maximising other income opportunities will speed that retirement date sooner. There's loads and loads of ways to do that- for the definitive guide see Nick Loper's site and podcast. 

4. Invest/pay off debt with the difference

The difference between your income and expenses is then plugged straight into clearing debt and investing. When pesky things like mortgages and credit cards are paid off, more can be poured into investments to make the process quicker and quicker. Before long you are making the most of compound interest and watching the balance grow. 

5. Hit your target and quit your job

Simple.... The big questions are- How much is enough? And how long will it take?

 25 times your annual living costs is the magic number to go for. If you invest this and draw down what you need to live on, then it should comfortably support you for the rest of your life.

The timeframe totally depends on how much you are prepared to save. If you put away 20% of your income (that's after tax), it takes 37 years to retire from starting at nothing. If you can manage 50%, it’s down to 17 years (full table here). The higher the proportion you save, the less time it takes to get there. 

“happiness is not very expensive – it is only retail companies and ad agencies that try to persuade you it is”

Put simply, the overall key is to live on much, much less than you earn. 

Which I think is a good aim to have, live simply, to work less overall and have more time to focus on the things that are really important to you. Earning enough to never have to work again. 

As Mr Money Mustache says "happiness is not very expensive, it is only retail companies and ad agencies that try to persuade you it is.

The challenges

Why aren't we all doing it? Surely everyone should be pursuing this lifestyle? Well, there are a few obvious challenges to this approach of achieving financial independence.

Firstly, you might not earn enough. It might be fine for someone earning a huge salary, to put away half of it per month, but for many, the money coming in barely covers the money going out. Even saving a small proportion is a huge challenge. Throw in other dependents such as children and other relatives, and there could be any number of good reasons to need to keep working. 

Also, you might actually enjoy your job. Some people do! Fulfilling work means that there is no rush to move on, no desperation to hit retirement.

You might also enjoy spending money. You might quite like a big house or an expensive car, and feel that it's worth trading years of work for. You might not want to stop work to live in a smaller house and ride a bike.

You might have other priorities for your money. From a survey run last year, dough readers on average give nearly 10% of their income away. What a generous bunch! Giving that much away will slow the process down as there is less to save- but surely that's worthwhile? There may be other incredibly worthwhile things that you choose to do with your money, rather than save it all for your own benefit.

Overall there is a lot to learn from this movement. There is a lot to be said for working to increase your income and reduce your expenses. It increases your options, makes you more able to cope with emergencies and could help you reduce stress around money.
"Don't spend just because it's what everyone else does."

It also shows that you don’t have to live like everyone else- you don't have to spend your money like everyone else. Actively choose how you use your money to reflect your values and priorities. Don't spend on x just because its what everyone else does.

There are other options too- is your current lifestyle the best use of the best years of your life? Is there a lesson to learn from a Mexican Fisherman about living simply, and working less?

Is retiring early right for you? If not- why not? And what is the best use of the best years of your life?

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