What is Stopping You from Retiring Early?

About 13 years ago, I had just driven three and half hours from my college campus on a Friday night to hang out with this awesome girl I was dating (and married 10 months later). She was finishing up a shift tending bar, so I sat down and hung out while she finished. Two seats down from me, this other girl (who was attractive) looked at me strangely and then looked away.

A minute later, she introduced herself. I was flattered but definitely uncomfortable… we began talking and within a few minutes, it was clear what her intentions were. She was trying to sell me on joining her MLM company. It was a good pitch… promises to transform my life, etc. Then she leaned in for her strongest part of the pitch – she told me about her plans to retire in 2 years, at age 28.

That’s when she kinda lost me. No, you won’t be “retiring” in 2 years. Weirdo. No one does that; you work at a job for 40 years or so, and then, if you’re lucky, you retire. And that was my view on retirement for the following 12 years.

But over the past 2 years, my views began to be challenged… what is retirement? What is early retirement? My friend J. Money at Budgets Are Sexy wrote a killer article on the concept of “early retirement” that completely summed up how I’ve been feeling, but couldn’t quite get it on paper the way that he did.

I’m not gonna try and retell the points that he makes, because you should stop over and read it for yourself… but I’m just gonna share how it challenged me, and how we all should be challenged by it.

“Early Retirement” is what true financial independence looks like. The ability to live your life the way that you choose to, without money holding you back from that life.

That definition isn’t exactly earth-shattering to me… even with my “old-school” view of retirement, this definition made sense. I remember sitting in my cubicle some days, and I would day dream – how much money would I need right now so that I could do what I wanted and never have to work again? In my mind, I usually arrived at somewhere around $5 – $10 million – basically, winning the lottery. If I just had that kind of money – THEN I would be financially independent and able to retire.

But my brain was missing the lifestyle side of the equation…

Lifestyle

What if I adjusted my lifestyle to fit what I truly value and believe?

I spent all of my 20’s thinking about the next big thing. My next car will be better than the one I have now, my next house will be better than the one I’m in now, my next suit is gonna be nicer, I gotta get the new gadgets while they’re still new… and the thing is, I really didn’t have a huge spending problem like many would imagine.

But I was caught in the cycle of always looking for the next Upgrade.

Following this “upgrade” thought pattern, yeah… I’d definitely need 7 or 8 figures to retire.

But what if I stopped upgrading? What if I stay in my current house for the rest of my life? What if I always own older cars? What if I stopped caring about what people think? Well… I wouldn’t need $5 million to live that life, would I?

Over the past few years, Lauren and I have adjusted our ideal lifestyle substantially. We live in a smaller house, our cars are dated and we might not replace them. But J. Money really challenged me to adjust my lifestyle even more with this nugget:

Here’s a riddle for you: what’s best – working for 15 years and living off (a lot) less or working for 45 years and living like a normal person?

There are entire online communities of people challenging themselves and each other to get CRAZY radical with saving money so they can be financially independent at VERY early ages. Yes, the economy isn’t so great… and if you have multiple kids (like us), there’s only so far you can go with living ultra-frugal. But, I was challenged by it – and I want to challenge you:

Needs vs. Wants

Categorizing your spending in terms of needs and wants is usually one of the first steps in any financial blueprint. It helps define what is truly important, and to weed out the rest (and stop spending so much money).

But the needs vs. wants comparison isn’t a ‘one-and-done’ task. It’s not something you complete, check off at age 33 and never do it again. In fact, I recommend performing the needs vs. wants comparison at least annually. Maybe more. Here’s why.

Budget Creep

Have you noticed what happens when you get a nice raise at work? You had plans to keep your spending the same and to put the rest in savings. Maybe you were successful doing this. Most are not.

Your money has a way of finding ways out of your wallet. Maybe you start going out to dinner more, decide to upgrade the car earlier than you planned… the money just leaves if you’re not intentional.

Budget creep just happens. It’s unintentional. So be intentional and figure out what ‘wants’ have creeped into your budget.

Your values change

What you think is a ‘need’ today might be considered a ‘want’ tomorrow. As you change, as you mature, as you continue to travel down this road of financial independence, you start to realize a few things.

What you once thought you could never live without, suddenly you might realize that you can. Cable TV, newer model cars, a huge cell phone data plan, maybe even the house you live in. These are all things that you may consider or have considered a need at some point.

But values change. You change. That’s why you need to compare your needs vs. wants many times.

It’s not just money that is used to purchase items. There’s also the opportunity cost. What else could you be doing with that money? In pursuit of a certain lifestyle today, you might be giving up financial independence in the future. You might have to work at that job you don’t like for a couple decades longer.

On the flip-side, the opportunity cost of choosing a super-frugal lifestyle will cost you now. But you can retire earlier. That point of true financial independence will come MUCH sooner.