Thursday, November 7, 2019

Early Retirement and Minimalism

One of the top answers anyone gives when asked why they don’t do something is “I don’t have the time.” What’s the simplest way to make more time? Plan on having an early retirement, while you are still young and healthy enough to enjoy it.

Retiring early is easier said than done.

Deciding to retire early is simple, but may not be easy. But wouldn't it be worth it? Imagine retiring in your 30s or 40s. You could do so many more things than if you waited until your 60s or beyond to start spending time on what's important to you.
The future holds many uncertainties. In my own family history, I have a father who retired in his 50s but died just a few years later from cancer. My mother had to wait until she was nearly 70 to stop working, for financial reasons. She had a few years of retirement before she, too, got cancer. I'm grateful she's alive and still fighting, but her health got bad enough that she can no longer live alone. She had to give up her house and most of her stuff to move in with us. She's doing ok with it, but it was (and still is) a big adjustment for her.
Based on my family's medical history (and my own), I don't want to gamble on being 65 or 70 before I get to decide how to spend the majority of my time.
That's why we decided to travel full-time for three years, and thank goodness we did. Because now, I'm not well enough to travel. It isn't guaranteed that I'll be better in the future, either. At the moment, I'm trying to change how we earn an income so that we are financially independent within the next 10 years. I'll be about 50 then, which is not too bad. But if you're younger than I am, I suggest you get started on your retirement now.

Don't wait to plan your retirement.

When I was younger, I took a lot of jobs that didn't include retirement accounts as part of the benefits package. I also didn't save a lot of money, thinking I couldn't (because I lived paycheck to paycheck). I figured I could worry about it later.
Now I realize what a colossal mistake that was, and I have to play catch-up. This is especially true because I know there is no way social security retirement benefits will cover my expenses. The amount just keeps going down from one generation to the next. Even though my mom worked more years than my grandmother, and she earned more income than my grandma, mom's social security benefit is only $500 per month, while my grandmother got about $600. Since the cost of living keeps going up, I doubt Ryan and I will get what we need from social security alone (if there's anything left at all).
So that leaves it up to us, as is true with many U.S. citizens these days. We do have retirement accounts that we contributed to over the years, but it won't be enough for us to retire on at the rate we are going.
In planning retirement, the first thing you need to do is understand your current budget, and what kind of expenses you will have in the future. Then you need to figure out how money much you need to put away (including estimated increases in the cost of living), and how much interest it needs to accrue, for you to retire. Look up "retirement calculator" and plug in your numbers to get a general idea of this.

The key to retiring early

The key to saving for early retirement is to spend less than you earn, and save as aggressively as possible. There are three ways to do that:
  1. Reduce your expenses;
  2. Increase your income;
  3. Do a combination of both
But no matter what, you need to have money left over each month to put into your retirement account.
I know it's hard if you already feel like you're barely making enough to get by. As I said before, it won't be easy. You will have to sacrifice now so you can get what you want faster.
If you have a hard time imagining making more money than you do now, my post about things to stop buying to save money may help ease the burden. Then when you have more breathing room, maybe you can revisit ways to make more income.
I also watched a great video on YouTube recently about a guy who retired at age 31 -- he goes by Mr. Money Mustache or Peter Adeney. One thing in his presentation that really stuck with me, is that money spent on things that don't make you happy, is money wasted. Unfortunately, most of us waste a lot of money.

Happiness is everyone's goal in life. The question is how you create happiness for yourself while still saving for retirement.

Mr. Money Mustache made another valid point about the separation between work and money. The purpose of working should not be to make money. It should be (as with all else) to make you happy. Whether your happiness comes from creating artwork or saving lives or teaching, the goal of your work is to fulfill a purpose other than earning money to pay bills.
The purpose of making money should just be to make money. And it should be evaluated separately from your work. Once you retire, you can still work. But you won't have to do it for money so you will gain more enjoyment from your job, or contribute to the world in a meaningful way (which can also bring fulfillment).
I'm probably paraphrasing too much here; I think it will make more sense if you watch the video:

Things I recommend against if you want to retire early

First and foremost, don't ever cut back on spending related to your health. So keep buying healthy food, stay on the medications you need to manage medical conditions, and get enough exercise. However, that doesn't mean you can't rethink your budget on these items and look for more frugal ways to be healthy.
Don't use the time that should be spent sleeping on a side hustle; make sure you get enough rest. You may be able to handle the lack of sleep for a while, but it will catch up with you eventually. Then your productivity will go down, and so will your resolve. Instead of being sleep-deprived, cut something else out of your day, like watching TV.
Make sure you have enough free time so that you don't lose touch with your support system. Trying to retire early is going to be a lot of work, so make sure you have people who believe in your goals and are there to encourage you. Take some time to update friends and family; their positivity will help you keep moving forward.
Conversely, don't hang around people who think your frugality is silly, or that trying to retire early is a waste of time. The people who want to drag you along with them on the path to debt and being a slave to a job are not people who care about you. Even if they don't agree, they should at least respect you enough to let you make your own decisions.
Lastly, don't forget to pace yourself. This is a marathon, not a sprint! If you can get it done faster than expected, then great. But just don't do it at the expense of your health, your relationships, or your ability to keep your current income source(s) and a place to live.

What I'm doing so I can retire early

First of all, I cut way back on our expenses, and I intend to do that even further wherever possible.
I also do a "purchase pause" before spending money; I keep waiting until I'm sure we really need to buy something. Often, months go by, and we still haven't needed the item in question. A lot of things we thought we wanted or needed are left unpurchased because we didn't need to buy them after all.
Then there is the issue of making more money. We already have a few income streams going. If we have to in the future, one or both of us will go back to being employees. But it isn't our first choice; neither one of us has had much luck enjoying employment.
So in the meanwhile, we are focusing on more types of income. One thing I'm doing is learning more about investing. Then I'm going to take our retirement accounts and evaluate things we can change to increase our earnings. I will also start investing money in diverse types of stocks, bonds, etc. Update: I took money from my former employer's retirement account and changed the portfolio. It went from losing money the way my employer set it up, to giving me a nice annual return with just a few simple changes!
I also will continue to keep a budget and monitor it regularly. It's important to keep tabs on where your money is going.
Lastly, I really focus on clear goals for the future. I think about what I want to do with my life once I'm retired. How will my work change? Where will I live? What kinds of volunteer work can I do? I have lots of ideas and goals, and I keep them in the forefront of my mind to inspire me to keep going.
What would you do if you could retire early?