In 2016, after accumulating close to $1 million in savings, I quit my six-figure job in software development and retired at 35. A few months later, my wife Courtney joined me in early retirement.
Not everyone will be able to retire in their 30s, but achieving financial independence is within grasp for many. It may not be easy, but you don’t have to be a money genius to get there. (In fact, I struggled all throughout school because of a learning disability. To get good grades, I always had to work harder — and longer — than my classmates.)
The first rule is the most important, and it has little to do with money. It’s about wanting to achieve a goal enough to make it your top priority.
Back then, I had a great salary and was good at my job. But I dreaded going to work every day. I didn’t enjoy having a boss or sitting through performance reviews. The meetings, office conflicts and long commutes were exhausting. I wanted to leave the 9-to-5 life and travel the world. So, in my late 20s, I decide to make early retirement my primary goal.
I focused on making dramatic changes to my financial habits. Instead of letting my money sit idle, I invested more of it. I also started saving 70% of my income. It was hard at first, but got easier as I kept reminding myself that everything I’d been spending on were things I either didn’t use or need.
None of the changes I made felt like a sacrifice, because I knew they were all in support of my goal. It’s like getting into shape: You’ll only lose or gain weight if you change your diet and fitness habits. And you have to want it badly enough to keep at it.
Even though I was making six figures, I was always thinking about ways I could use my skills to actively boost my income when I wasn’t in the office.
I started a financial site and wrote on it consistently. Eventually, I was earning a monthly average of $1,000 through the site. Courtney and I also started a YouTube channel documenting our travels, which brought in another $400 to $500 per month. And with the bit of free time I had left, I made an extra few hundred bucks through freelance writing.
But I still worked hard at my day job, because it was my primary source of income. I wanted to show my boss why I deserved a 10% or 15% raise (which I asked for, and got — twice). Midway into my career, I built up enough courage to ask for a big promotion. Four months later, I was moved up to a director role.
Courtney also earned several raises. With both of us saving 70% of our combined income, which ranged from $200,000 to $230,000 a year, we were getting closer to early retirement.
Saving money, getting raises and doing side hustles alone won’t help you retire faster. Courtney and I built much of our wealth by investing in appreciating assets, such as the stock market, real estate, businesses and relics or historic objects.
The idea behind this is simple. You buy an asset for a certain price. Over time, the asset appreciates (or increases) in value. And boom, now you have something that’s worth more than what you paid for.
But, here’s the magic: Through the power of compound interest, our assets don’t just build linearly. Instead, appreciating assets build exponentially.
If you invest $1,000 and it appreciates 10% (or $100) in a year, then your new base starting point in the next year is $1,100. Another 10% gain is $110, not just $100. Add a couple of zeros to that and we begin talking about quite a bit of money — enough on which to retire.
Over the subsequent years, thanks to investing in appreciating assets, we grew our savings to more than $1 million. When it comes to investing, late is always better than never. If you haven’t started, there are plenty of resources online or you can talk to a trusted financial advisor.
I always like to take the hands-off approach whenever possible, especially when it comes to money.
Many employers offer retirement plans, and most companies will automatically make contributions straight from your paycheck into your investment accounts. Once it’s set up, you never have to worry about it again.
Courtney and I used this to the fullest when we were working:
- We automatically contributed to our 401(k) and IRA accounts
- We automatically transferred money from checking into savings
- We automatically paid our credit card bills
Automation will make your life so much easier, because you won’t have to rely on discipline to pay bills, avoid late fees, interest charges or reductions in your credit score.
One of the most effective ways to eliminate debt is to know exactly where your money is going. Every penny matters. This is a basic principle, but so many people lack the discipline to sit down once a month and review their spending.
A few simple actions will can make a huge difference in your finances:
- Look at your bills instead of throwing them aside. Make sure you understand every line item on your bill.
- “Fun” spending should come after paying your bills and funding your retirement accounts.
- Don’t ignore small expenses. They can tell you a lot about what spending habits are working against you. Morning coffees, lunches out and grabbing a bag of beef jerky, for example, all add up big time.
- Monthly subscriptions are notoriously forgotten. Make sure you’re aware of what they cost and whether you actually use them or not.
I used to be a super-spender. I had a supercharged Corvette Convertible and a Cadillac CTS. I also rode a Yamaha R1 sport bike around town, paying $150 per month for insurance. But I sold all those things after I made early retirement a goal.
Courtney and I now live a very frugal life, and we couldn’t be happier. We cut cable TV and use a streaming subscription for half the price. We only spend $50 per month eating out at restaurants. We buy new clothes less than twice a year. We only upgrade our phones if it’s completely broken.
You don’t have to cut back on everything; this principle is about reevaluating priorities. I believe in spending liberally on things that bring you lasting joy, and cutting out expenses for things that don’t. The key is to admit what makes you happy and what doesn’t.
Steve Adcock is a financial expert who blogs about how to achieve financial independence. A former software developer, Steve retired early at the age of 35. His work has been featured in U.S. News, MarketWatch, Forbes and Business Insider. Follow him on Twitter @SteveOnSpeed.
- 38-year-old retiree: ‘America, stop wasting your money on these 7 things—if you want to retire early’
- How Warren Buffett’s son spent the $90,000 of Berkshire stock he got at 19—worth $200 million now: ‘I don’t regret it’
- 42-year-old retiree: ‘I lost more than $600,000 due to the pandemic. Now I’m second-guessing early retirement’