At the age of 30, after teaching in inner-city Washington, D.C. for half a decade, my wife and I were burned out. We quit our jobs, sold most of what we owned, and moved to Costa Rica. Along the way, many people asked a fair question: How were we able to retire early?
In reality, we weren't "retired." We were simply trying out something called a mini-retirement. During our six-month stay in a tiny Central American village, we met a lot of people who had wandered pretty far off the beaten path. In meeting these expats and interacting with locals, we realized something about how to retire early that's worth sharing: At its very best, it is nothing more than a by-product of a life well-lived -- with a little luck involved, too.
The early-retirement continuum: two means to the same end
It seems to me that those who are able to retire early -- or, better put, those who have achieved financial independence at a young age -- have done so on a continuum. On one end of the continuum is what I'd like to call the Unbalanced Approach.
The Unbalanced Approach is top-down and laser-focused on retiring as early as humanly possible. Here are the key tenets on this end of the spectrum:
- Work in whatever job pays you the most, accumulating as much money as possible.
- Spend as little of that money as possible so that you can save and invest the difference.
- In terms of time and personal development, all decisions are made based on what will help you reach your "retirement number" as soon as possible.
There are lots of people who, knowingly or not, fall on this end of the spectrum. Right out of college, scores of my friends became investment bankers on Wall Street. Though they all had their own reasons, the most common refrain was simple: "I'll work and earn lots of money for as long as I can, and when I can't stand it anymore, I'll stop."
Ten years later, as you might expect, there were lots of unintended consequences to this approach: poor health (both physical and mental), few meaningful social ties, and a sadly warped sense of self that was irrevocably intertwined with net worth.
But in our travels, my wife and I discovered a "Balanced Approach" that many financially independent people used, even though financial independence wasn't one of their goals.
The Balanced Approach is bottom-up and focused on getting as much real-life experience -- financial, social, emotional, spiritual, you name it -- as possible. Because he says it better than I can, here are the key tenets of this approach, as expressed by popular blogger Mr. Money Mustache:
- "This is not about being cheap, minimalist, or extreme."
- "Learning to separate 'happiness' from 'spending money' is the quickest and most reliable way to a better life."
- "The side-effect of this is that your life will become much less expensive and you will therefore become much wealthier very quickly."
I can already hear the devil's advocates starting to pipe in: "But the Balanced Approach doesn't guarantee financial independence, and the other approach does."
To that, I have two things to say. First, the future is completely unknowable; there are no guarantees. Second: While early retirement might not be guaranteed, a happier, more balanced life is certainly more likely. And in the, end, very few people actually exist on the extremes of this continuum -- most find their happy medium.
Redefining early retirement
Many people, given an unexpected windfall, might drastically change their lifestyle. That might include traveling the world, getting season tickets to the Yankees, and upgrading their house and cars. And that would surely make them happy for a while.
The insidious thing about all of it, though, is that it wouldn't produce any lasting effect on happiness. Both the cold, hard facts of scientific studies and the more relatable anecdotes from our own lives are proof enough. Jumping on the hedonic treadmill is both expensive and bad for your well-being.
There are certain things most of us need to be happy that have nothing at all to do with spending money, things like being part of something bigger than ourselves, eating well, having meaning and purpose, getting enough exercise and sleep, and nurturing important relationships.
The monetary cost of most of these things is minimal at most. And if you think about it, if you're able to get all of these things -- but not able to retire early -- that's not so bad at all. Of course, there are some people for whom this isn't possible -- especially those in extreme poverty, and that's where the luck comes in.
But for many, early retirement can be the natural, healthy by-product of simply focusing on what makes you sustainably happy and content. What should your real end goal be? As Mr. Money Mustache put it: "[Aim to be] a person who has so much happiness and balance in your life that you can't imagine anything you could buy that would make you any happier."
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