Sometimes you need to increase income to reach very early retirement

Being frugal is sometimes not enough for extremely early retirement (or financial independence) 

Extremely early retirement is possible through frugal living, but it is also important to have a decent come to let you save up fast. If you only make what counts for minimum wage in your country, even a high percentage isn't much money and who wants to live on a completely bare-bones depression budget?  We should live off of the basics, but not suffer to get by.

To me frugal is to only spend on what you need to be healthy, happy, and comfortable over the long term. I don't need to have a night at the cinema to be happy. At least I don't need that more than once a month (or perhaps once every two months.

I do however need to eat a variety of vegetables on a regular basis. If I don't eat my veggies, I feel bad and lethargic. I know that if I only ate the cheapest vegetables I'd spent a little less on food, but it would cause a large decrease in happiness compared to the savings of perhaps 30-40 pesos per week.

Being frugal is also not buying on impulse or getting something just because it is cool, trendy, or what all your friends have. It is living without spending a lot of money on entertainment.

Having said that, we all have to eat, pay for a place to live, and clothes to wear. Unless you have a several thousand dollar a month income or live for free with your parents, it will be difficult for you to save the 80% of income needed to retire in about 6 years.  saving 80% spending 20% withdrawing 4% annually 6.25 =25/(0.8/0.2).


The less you save the longer it will take you to reach your very early retirement savings goal. I was a little disappointed to see that at my current 50% savings  (about 40% more than your typical earthling), It will take me about 25 years according to the formula. 25 =25/(0.5/0.5) If I were in my early 20s that would be fine, but I'm almost 36 years old and I want to retire in my mid 40s so I need to make a plan to increase that percent!


If I go from 50% to 60% (which would either mean packing my sandwich or rice with vegetables or eating at home everyday and perhaps washing my clothes by hand), It will take me about 17 years. That's still too long for me.


The only solution is to live frugally and increase income. The more I make while maintaining my expenses at the current (frugal, but no suffering) level, the more I will save (the higher the percent for savings).


At 70% savings, I can retire at almost 11 years. That's not bad. It is one year more than I'd like, but I am actually planning on working on my artwork so I could sell a few paintings and digital artwork and sell some graphic design. I very much doubt that Print-on-Demand websites will go away so I won't have to live 100% off my savings. I might go into semi-retirement after 8 years if I can build a small or tiny house in the country and have a garden, internet, and a solar water heater. It is hard to say since I only recently thought of the idea. It would be fun to have a couple years dedicated to creating art and design to survive on and live simply. Sometimes being a teacher with a full schedule can be stressful.


Now that I know I need to increase my income and live simply to reach my retirement goal, the next step is to find ways to increase that income. Do I want to find another job? Perhaps I could blog for someone else or write a book? I could put extra time into creating great graphic design. I could try to find more translation work. It is stressful, but a long translation could mean a lot of income if I could find someone who needs that help. I could also raise prices for English classes, but that also will increase the possibility that people will cancel when they have unplanned expenses.

I want to retire in 10 years when I'm almost 46

Last Thursday, I was talking to a student who owns a small accounting firm. I've had conversation classes with him off and on for probably 7 years. We typically meet once a week.
I'm not sure how exactly, but we got into a conversation about the future.  His plan is to have his big house to enjoy with his family in a good neighborhood and live well. He loves his work, but he plans on stopping around the age of 60 or perhaps late 50s or at 65 depending on how things go. I think he has a great plan since he loves his work. I don't think there is a right or wrong as long as you have a plan that will meet what you need and want out of life.

I told him something that surprised him. He shouldn't have been surprised. You'd think he wouldn't be that surprised, but I saw a shocked look on his face for a few seconds.  I told him that I want to retire in 10 years.

We started to discuss the numbers since accountants need to see the numbers to fully relate to the concept.  We decided that saving an average of 8000 pesos a month would probably be enough to get by with minimal expenses since I'd make interest which would compound and of course I don't have any children to take care of or a mortgage to pay for.

The next question was what I would do if I retired in ten years.  He understood my answer although he couldn't really relate.  I told him that I'd travel off and on. I'd love backpacking and staying at hostels and meeting people and trying new things and taking photos and all that.   I don't want to wait until I'm old to experience that. If you wait until you're 65 to enjoy your retirement, you'll probably only have a few more years of good health to actually travel and do all that.  You'll probably live into your 80s if you don't get sick, but most people die in their 80s and have not-so-great health in their 70s.  I want to be able to enjoy a few decades of travel, discovery, trying new things, and spending time with friends and loved ones BEFORE I get that old.

If I had the same awareness 10 years ago, I would have planned to retire sooner, but I wasn't mature enough in my 20s to take the decision to save a high percent of my income skipping some immediate pleasure to have it years from now. I suppose most of us think that we have decades more before we should even think about it. I think that after reading the typical advice of working and saving 10% and retiring when you are too old to fully enjoy it wasn't very motivating to me. To retire early, you need to save a very high percent of your income and invest it, but I NEVER saw any popular personal finance adviser recommend it. I always read to save 10% and have an emergency fund and just keep working until you're old and hopefully have paid off your huge mortgage on the big house.

Yet, I think the problem is really how I define retirement. Retirement for me is NOT sitting on the balcony bored watching people walk by and watching some television.  To me retirement will be living simply, gardening if I can find the space, learning and growing as a person, and getting inspired and helping others when I can without being taken advantage of.

I don't plan on not working at all. I plan on working part time when I feel like it not working because I have to because I need to pay the rent and bills. Perhaps I'll teach one group or become a writer. I might decide to study in a study from home using the internet for a university degree. I might take some painting or drawing courses or learn something completely new.

Retirement for me is financial independence. The ability to choose what you want to do or not do on your own terms.

Reduce Housing Expenses to save money

Since your goal should be to save as much as possible every month so you can get financial independence, early retirement, or buy your own home, perhaps you could start with those pesky large fixed expenses.

The three largest expenses for most people are food, transportation, and housing.

Your housing expenses could be mortgage payments, property taxes, maintenance, and home owner association fees. It could also be rent payments or perhaps you live with your parents for free!

Assuming you can't or don't want to live with your parents consider one of the following:

Move to a smaller apartment. Go from three bedrooms to two bedrooms or two bedrooms to one. If you are in a one bedroom apartment consider an efficiency apartment. from there perhaps rent a bedroom with kitchen access near where you work.

Do you have a two bedroom apartment? Instead of downsizing you could rent the room to a friend or post an advertisement. Increase what you want by a little to cover utilities and don't forget to ask for half of the deposit.  If you rent to a stranger ask for references and be sure your bedroom has a lock on its door.

Many people don't move to a smaller and cheaper apartment or share because they have too much stuff. The extra room is full of boxes of stuff. You may not even remember what's in the boxes, but they're there taking up space and costing you money.

If that's your situation, then you need to urgently go one box at a time and make piles of things to sell, things to toss, and things to donate. Whatever doesn't sell gets donated.

An excellent rule is to get rid of whatever you haven't used for one year.