The dream of retiring early has nothing to do with wearing your pajamas all day, or spending every afternoon at the golf course -- study anyone who has actually called it quits in their 30s, 40s, or 50s, and you'll see that's not the case.
Instead, retiring early is all about gaining financial independence: the ability to choose what to work on, when to work on it, and how that work will be done. In the simplest sense, it is about the intersection of autonomy and purpose.
Are you ready to take the plunge into early retirement? Image source: Getty Images
If retiring in the next decade sounds like something you'd like to do, these are the four simple (even if simple does not mean easy) steps to get you there.
1. Set your intentions, but remember: most goals are for suckers
It's one thing to dream about being free from mandatory work; it's quite another to actually accomplish it. Setting an intention helps transform a short-term impulse into a long-term reality.
Research confirms that when language learners are forced to identify specific goals before entering class, they fare far better than those who don't on cognitive tests. That's because they know what to look for, are better at maintaining their focus, and are continuously evaluating how they're doing.
As Annie Murphy Paul of PBS puts it:
Listening and observing can be passive activities ... Or they can be rich, active, intense experiences ... The difference lies in our intention: the purpose and awareness with which we approach the occasion.
The same goes for financial independence: if you have an intention, it can lead to a rich and active experience with your own life.
Here's my surprising suggestion, though: Do not make retiring early your intention. Outcome-based goals are for suckers; process goals are what you should be focusing on. This distinction is the difference between a happy and miserable existence.
Consider a tennis player: One whose goal is to win Wimbledon may accomplish the goal, but will only experience success once, and then need to climb back onto the hedonic treadmill. Another who wishes to improve their tennis process every day may end up winning Wimbledon as well, but she will do so while enjoying every step of the way.
Here's what it looks like
Author's illustration.
There's no blueprint for process goals and early retirement, but here are some suggestions to get you thinking:
- Wait at least a day before making a purchase of over $250 to "sleep on it."
- Eliminate all status-related purchases.
- Treat time as a more valuable commodity than money, with the latter only working for the former's benefit.
2. Ridicule and curiosity: prepare for both sides of the same coin
Stories are potent tools. As former Fool Morgan Housel recently demonstrated, while we have more data than ever right now, stories remain more powerful and persuasive by an order of magnitude.
In American society, there's a dominant -- if under-recognized -- story we live by: do well in school to get into a good college. Do well in college to get a good paying job. Get a good paying job to live in big house, drive a nice car, and send your kids to a better school than you went to. Continue on this path for 40 years before retiring.
Early retirees have a different story: follow your interests and passions in school, live below your means while working, and free yourself from wage slavery as soon as possible.
As someone who quit his job and moved with his wife to Costa Rica at 29, I can tell you that there will be two reactions to your decision: ridicule from disciples of the former, and curiosity from others interested in the latter. They are two sides of the same coin; prepare for both.
3. Practice via negativa
Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away.
-- Antoine de Saint-Exupery
Too often, we believe if we just add [insert material good] into our life, things will be perfect. But life doesn't work that way. The more we have, the more we want, and the more complicated our lives become.
Take the opposite approach. By removing the clutter from your life -- stuff, friends, and activities that don't add value -- there's more room for what matters. Indeed, it is everything that remains.
Financially, here's the key benefit of finding your level of "Enough" using "via negativa":
- It gives you more money to save and invest.
- It lowers the amount of money you need to maintain your lifestyle.
4. Save and invest the difference
In the end, you don't need to be an investing wizard to retire early. Simply putting your money in a low-fee index fund can get the job done.
It's your savings rate that makes the biggest difference.
The Most Important Factor: Your Savings Rate.
Start living off of 35% of your income today, and even if you haven't saved a dime, you can retire in 10 years or less.
While the messages surrounding us don't encourage this path, by setting a process-oriented intention, preparing for strong reactions from peers, practicing via negativa, and regularly investing in stocks, you can retire sooner than you might think.
