My plan for early retirement

James blogs at Free in Ten Years where he documents his path to an early retirement. He is planning to retire at 38 by saving 75% of his income by being a frugal machine. He blogs about money saving ideas, investing and avoiding consumerism.

I am planning to be retired from paid work within ten years; on or before my 38th birthday.

I have an average income for my country and started this process with a moderate amount of consumer debt. I was in a very typical position for someone my age, although had the considerable benefit of having a full-time permanent job and a partner in the same position with the same interests in frugality and travel.



Photo Credit: TheAlieness Gisela Giardino via Flickr

The blueprint for early retirement

One of the paradoxes of early retirement is that it is extremely easy to lay out a plan that simply has to work if it’s followed properly, but very hard to implement.

Any plan that relies heavily on not just spending less than you earn, but spending a tiny percentage of what you earn is going to be difficult. It requires bullet-proof will power, sacrifice and a willingness to be different.

My plan is very simple.

  1. I try to spend less than 25% of my salary
  2. I invest the difference
  3. I wait until my investment income regularly surpasses my expenses
  4. Early retirement in ten years!


How do you live on 25% of your wage?

There is no magic bullet and no way to be driving a brand new BMW as well as saving 75% of your wage unless you are earning mega-bucks. For those of us on normal incomes there are a whole raft of sacrifices that need to be made.

A good start is to try to avoid lifestyle inflation which is the uncessary increase in spending to match an increase in income. If you have lived as a university student then you know it’s possible to live on next to nothing – and also that it’s quite a fun way to live.

You just have to not care that you don’t have the same material possessions as your co-workers.

Here’s a few major ways to save money:

  1. Live close to work
  2. Own a used car, or don’t own one at all
  3. Ride a bicycle
  4. Buy used clothing
  5. Don’t eat takeaway at all!
  6. Bring your lunch to work
  7. Eat more vegetarian meals
  8. Cut your own hair
  9. Watch less television (to avoid advertising)
  10. Swap expensive hobbies for free alternatives

There are of course many other ways to save money, but these are some of the most effective.


Won’t people judge me for being so cheap?

Most people won’t even know. The reality is the most people are far too busy worrying about themselves that they won’t even notice that you’re bringing your lunch to work. Or that you’re a bit sweaty in the morning from your ride into work. You can dress these up in other ways if you like.

“I’m bringing my own lunch because I’m trying to be healthy.”

“I’m riding to work to get fit.”

It is really important to learn the difference between being cheap and being frugal, and it will go a long way to hiding what you’re doing from other people if that is important to you. Buying many very cheap disposable containers is not nearly as frugal as buying one high quality container that you reuse. Similarly it is normally worth investing in quality knives, pots and pans so that you only have to buy them once.

A $40 hammer bought once is cheaper than a $10 hammer bought 5 times.


Why would I want to quit work so early? Won’t I get bored?

Just because you reach the point of financial independence doesn’t mean you have to quit work.

Work for as long as you want to after that point, but you can do so knowing that you can stop at any time. You know that if your boss becomes totally unbearable you can tell him or her where to go. With the complete freedom of knowing you could never work again and be financially safe.

It allows you to work for charitable organisations without worrying about money. It allows you to travel for as long as you like. The options are endless!

If you like the idea of waking up at midday, pursuing a dream without the worry of how you are going to pay your bills or just enjoying your best years how you see fit rather than at work, you owe it to yourself to consider retiring early from paid employment.

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  1. We are also looking to be financially independent by the time we are 38 as well. It is a hard thing to implement,but we are doing our best to sacrifice. So far it is going well. Good luck to you too!

  2. I totally agree that most people won’t even know!

    Mr. PoP and I are aiming for financial independence by our mid-late thirties as well, and most of our friends have no idea. They don’t look at us and say, “Oh my gosh the PoPs are the most tight-fisted people we know!” We’re just us. =)

    • Yeah, lots of people worry about how other people will view them if they don’t spend all of their money flamboyantly but the reality is that no one notices because they are too busy with themselves. I’m getting to the point now where I genuinely don’t care who knows that I’m not into spending my money on useless consumer purchases – in fact I’m proud of it.

  3. Derek @ Freeat33 says:

    Nice Job James. I’m working for an early “parole” too. I don’t necessarily plan to quit working for a life of video games, and Kraft dinner when we reach financial independence, but it’ll be pretty sweet knowing I could if I wanted to.

    • Thanks Derek. Video games and Kraft dinner actually sounds pretty good to me! I’m like you though – it’s more about knowing I could do it rather than actually wanting to pull the pin on work. I think I’ll probably work beyond the point I technically have to, but it will be amazing to go to work knowing I could walk out at any time and be perfectly fine financially.

  4. Mandy @ MoneyMasterMom says:

    I’m glad to hear that your partner is on board with frugal living. Otherwise it would be a difficult hurdle to overcome. Good luck with your goal.

  5. Pauline says:

    Great job, good luck with your goals! I “retired” at 29 and it does feel great. Like you I had a very normal income and with determination it can be done.

  6. I agree most people are so consumed with their own lives that they won’t give a toss what you do unless they are super nosey. I would say we do almost everything on that list except cut our own hair but we do go to our mate who is a hair dresser and cuts it for $9. Great post and good luck on your journey mate. Do you think your opinion on retiring early may change in 10 years? or are you 100% for sure.. done? See now I’m being super nosey… lol..

    • I’m close to a 100% sure I’ll still feel this way then, but it’s pretty hard to make predictions about these things that far into the future. I know that even if I change my mind halfway through, my finances will be in really good shape and I won’t have had any less fun.

      Once I reach financial independence I won’t necessarily quit work – I’ll keep working until I don’t feel like it anymore. The longer I delay it the safer the retirement will be.

  7. Michelle says:

    We also want early retirement, but a little different. We just want to be able to continue working while not worrying about money entirely.

  8. Eddie says:

    Congrats towards working to early retirement, but I’m curious as to what you plan to do after you retire early. Call me crazy, but I actually enjoy working – it keeps me in tune with the world amongst many other things.

    • I enjoy work too for the most part. I think I would continue to work at least in the short term after reaching financial independence. It means I wouldn’t have to do paid work as distinct from unpaid work (charity work etc) if I didn’t want to. It’s just about having options.

      Largely though, I’d love to travel and see the world, educate myself more thoroughly about subjects that I enjoy and spend time with my partner and family. Essentially do everything that work makes difficult.

      Sleep in until midday every now and again.

  9. 75% is impressive, well done! Lifestyle inflation is catching up with me. It’s surprisingly fun though. I remember spending an hour buying a spatula as a student, wanting to make sure I got the best value and highest quality product. Too bad that now my time is worth so much more. Oh well. We’re at 50% or so, but that’s with two very solid incomes.

  10. Terry says:

    Great article.

    I like your 25% goal for spending. My wife and I each have a car because we go different directions to work, but now your article has me thinking about reducing that to only one car.

    It’s nice to have the convenience of 2 cars, but the cost of repairing the cars can be outrageous.

  11. I love how you have your goal and are taking steps to make it happen. I love the idea of working because I want not because I have to. I am already 38, so I wish I’d gotten on track sooner, but I’ll get there.

  12. Do you own your home? Will that be paid by the time you’re 38?

  13. Bichon Frise says:

    I don’t understand what you mean by investment income? Are you investing in dividends and counting only those? Or is there some withdrawal rate assumption?

    If just dividends, what is your tax plan? What about within tax advantaged accounts? Are tax advantaged accounts even counted in your calcs?

    The point is, investment income doesn’t matter. What your entire portfolio can give you in real spendable (after tax) cash is more important. Which becomes complicated and full of assumptions…

  14. Travel is a great thing and although retired you’ll be within age to pick up odd jobs or still get a small income from online work to soften the trouble.

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