I'm Going to Retire Early

07 Aug 2013

Well, maybe not retire, but I'll certainly be financially independent. This is a new goal that I've had for a while, a little over a year at this point, and it is certainly different from my get sexy goal.

Why?

Anyone that shoots for early financial independence or early retirement will have different reasons. You might want to travel the world, be at home with your family more often, or play video games all day instead of working. The simplest answer for most is that they have better things to do with their time, or activities that they find more valuable than work.

I'm not sure what I'll want to do when I reach early retirement, but I'm sure that I'll have a few things in mind that don't include slaving away more than half of my waking life for someone else's profit.

How?

Financial independence is gained by having a source of income other than work that will allow you to live your life without a change in lifestyle. Basically you would need income to match your spending level (not the same as your job's yearly income).

I live a relatively low cost lifestyle, which means that I spend less than 50% of my net take home pay. I'm able to invest the difference in broad index funds, which will compound to the point that they are capable of paying for my lifestyle.

Living below your means is really the only way to build a retirement fund. Having a billion dollar income does you no good if you spend a billion dollars every year. I'll have a future post that details this a bit more with some real world examples, and probably some fun math.

When?

My original goal was to hit financial independence by 42. I had calculated this number based on my spending when I first grew an interest in FI. Since then I've actually been able to reduce my spending further, make some optimizations, and get a pay raise. Rerunning the equations, and I'm now projecting to be FI at age 37.