A Priceless Retirement

A regular feature of The Motley Fool Rule Your Retirement service is our success stories -- profiles of people who have become financially independent. One of the most remarkable stories is about Billy and Akaisha Kaderli, who, at age 38, left their fast-track lives, moved to Nevis, West Indies, in the Caribbean, and started traveling the world. We caught up with the Kaderlis, currently in Thailand, and in this article, they talk about how they live luxuriously on $24,000 per year.

Some say it's impossible. Others simply dismiss the notion outright even if they are curious. How do we live on $24,000 per year while traveling through New Zealand, The West Indies, Laos, and other exotic locations? We don't give up luxury, nor do we deprive ourselves. So what is our secret?

Our approach is very simple: We have chosen not to dedicate our time and money to support a complicated infrastructure.

Over the past 12 months, we have lived in Ecuador, the U.S., and Thailand and also bought a new computer and a digital camera. On approximately $24,000.

We have spent considerably more in some years than in others. However, on average, over the past 15 years of our early retirement, our figures have fallen in this range.

How is it possible? From the graph below, you will see a listing of categories in which we track our spending, with the percentages based on our actual spending from Nov. 1, 2004, to Oct. 31, 2005. We want to clarify that we do not budget but rather operate from the position that we are not conspicuous consumers. (Keep in mind that the $24,000 is net per year, not gross. This amount reflects our actual spending, not a paycheck amount from which taxes and savings must be drawn.)

Downsize the house, car, and Uncle Sam
Housing includes our annual fees, maintenance, repairs, and utilities for our home in the States, as well as hotel rooms or apartments we may rent while on the road. Transportation includes gasoline, oil changes, licenses, tires, and insurance for our vehicle at home, as well as airline tickets, visas, taxis, boats, trains, and tuk-tuks.

If you look at your own expenses, you will see that housing and transportation take a good chunk of your income. Becoming mindful of what goes in to support these two areas of your life will be eye-opening. Take a close and honest evaluation of this state of affairs for yourself. Understand precisely where your money goes and why.

Another area that takes fiscal attention is taxes. Income taxes are something you can control by structuring your portfolio to reflect this choice. Interest from corporate bonds and short-term capital gains are taxed at income rates that are higher than qualified dividends and long-term capital gains.

In most cases, housing, transportation, and taxes are the top three areas of cash outlay in a person's economic life. Modifying any or all of them -- which is exactly what we did -- will have a significant impact on your annual expenses.

High living, low costs
All that being said, we have a great deal of fun living on $24,000 per year. Spending wisely, we get the most bang for our buck. For instance, living in a resort location, we have access to a swimming pool, tennis courts, and a workout room without having to lay out cash for their maintenance. We eat high-quality meats, fish, fruits, and vegetables because we shop at farmer's markets and watch for the rotating grocery sales to purchase when prices are attractive.

Walking instead of driving whenever possible, we also choose low-cost entertainment options such as tennis, hiking, biking, swimming, going to museums and art shows, and reading books from the library. Volunteering for projects in local cultures and in our community provides us with new learning experiences. We share time with friends either cooking for them ourselves or going out to lunch instead of opting for higher-priced dinners. And when it's time to hit the road, we take full advantage of current airline deals and travel packages.

Reaping the benefits of simplicity, we place more emphasis on creating a life of meaning rather than a life of "'stuff."

What about you?
So you think you can't make it on $24,000 yearly? How about $48,000 or more? All this means is that your net worth will need to be high enough to maintain these levels of spending. (To figure out how much you'll need to pay for the retirement you want, give the Rule Your Retirement service a 30-day free trial.)

No matter where you are in this continuum, you can profit from doing any of the following:

1. Simplify your personal infrastructure. Know where your money is going, and decide whether it's worth it to you. Do you want to keep up the pace of your current spending? Make your funding priorities reflect your values.
2. Plan your retirement tax strategy now.
3. Know there is a balance in the exchange of time and money. Do you want more money, or do you want more time? This could be a crossroad you face.
4. Remember, the best things in life are free. Friendships and connection to society are based more on your attention and time, rather than on your money. Watching the sun set with a loved one -- sharing life experiences together -- creates memories that will far outlast anything you can purchase.

In 1991, Billy and Akaisha Kaderli retired from the brokerage and restaurant businesses to a life of international travel. Visit their website at RetireEarlyLifestyle.com, and check out their new CD book, The Adventurer's Guide to Early Retirement.