My dad made enough money to retire in his early 50s. And it's not because he was a doctor or lawyer. He was a junior high school metalworking teacher -- a job that pays a decent wage, but certainly not one associated with wealth. My mom also didn't have a huge income -- she sold pottery as a side gig, but spent most of her time taking care of the rest of us.
So you definitely can't attribute my dad's early retirement to a high family income. He also didn't win the lottery, or get a million-dollar inheritance, or even sell more than one of his children to work in the salt mines. Instead, he was able to retire well more than a decade before his 65th birthday by following one simple philosophy:
Only buy value.
Throughout my life, my parents recognized the value of a dollar. They knew what they wanted, and would only buy the things that were actually important to them. I don't think I ever saw my parents buy an impulse item at the supermarket cash register. We'd go out to eat maybe twice a year, but only at McDonald's. Of course, as a kid, it was pretty hard for me to imagine a meal better than a hamburger and fries, so everyone was happy.
On the other hand, my parents were quite willing to pay for the things that mattered. In the early '80s, we had two computers at home, because my dad saw the value of them to both himself and the children. McDonald's aside, we ate healthy food, simply focusing on whatever fruits and vegetables were in season.
As a kid, I really didn't understand why my parents were so concerned with saving a dollar. After all, would adding a $0.50 chocolate bar to an $80 grocery bill really make that much of a difference? But it's clear now that their savings really did add up. It gave them enough to start investing. My parents didn't focus on the $25 that they saved today, but rather on the $1,000 that the money would become after 30 years in the stock market.
My dad took the same value approach with his investments. He owned a variety of mutual funds, including one run by one of the world's most successful value investors, John Templeton. Templeton made a fortune by scouring the globe for the cheapest opportunities. From nothing, he built Templeton Funds into a powerhouse that he eventually sold to Franklin Resources
Templeton preferred to buy the companies at the point of maximum pessimism. During the Depression, Missouri Pacific Railway, now Union Pacific
Templeton continued looking for undervalued stocks driven down by pessimism. In 1978, when the market feared that Ford
Templeton didn't simply look for cheap stocks, but rather the cheapest stocks he could find, anywhere in the world. He didn't see any point in buying Safeway
The road to retirement
Templeton's "Buy Cheap" philosophy appealed to my dad, and the fund helped propel him to an early retirement. Templeton was an extremely successful investment, but both components of his strategy were critical -- living a lifestyle that left money to invest and recognizing that he could achieve superior returns by investing in the cheapest stocks.
It's a strategy I'd recommend to anyone looking to retire early. Start by focusing on your expenses, only buying the things that have real value to you. Then, invest your excess cash in undervalued stocks that are likely to have the highest returns. If you're following this path and are looking for value stock ideas, you can get a head start by reading about all our Inside Value newsletter stock recommendations using this free pass.
Fool contributor Richard Gibbons knew as a child that Templeton ran a stock fund, and now Richard's 2-year-old son can identify pictures of Warren Buffett. Odd, that. Richard does not own any stocks discussed in this article. The Fool has a disclosure policy.