I wanted to retire by 40, but I ended up retiring at 35

Originally, my goal was to quit the rat race and retire by 40. I was in my early 30s at the time and retiring by 40 seemed like a good number. A nice, round figure to aim for.

But as I started reading more about retirement, personal finance and financial independence—and especially how the decisions that we make on a daily basis directly affect our ability to retire—I quickly started to realize that I might be able to retire even sooner.

Like, maybe in my mid-30s. And, that's precisely what I did.

It still seems like a dream to me sometimes, but I retired at the ripe old age of 35.

Today, I am living a life of pure freedom. No more full-time job just to generate an income. No more status reports or presentations that won't make a difference. No more 8-hour days of doing anything other than what I choose to do with my time (hello photography!).

How did my wife and I pull this off? To retire by 40 (or, 35!)?

For us, it was a simple 6-step program. Not necessarily easy at times. And, it also wasn't quick. But, it wasn't fundamentally difficult, either, once we started to prioritize early retirement over everything else, even income.

Six steps to retire by 40

  • Downsized the "stuff" - I sold my 1999 Corvette Convertible, which was a completely unnecessary expense, along with our Ridgeline.  My wife and I initially cut our cable service down to the basic package to save money and then we eliminated it altogether. We also downsized by Good Will'ing old clothes and gadgets, tools and general clutter.  No more packrat activities in this household!  I took inventory of my home and anything that wasn't used during that month got donated.
  • Savings: Thousands in insurance and maintenance costs for the car, and far fewer items to store and keep safe.
  • Rode a motorcycle - I rode a motorcycle as much as I could and saved a whole slew of cash that would otherwise have gone to gas money. With my car, I was filling up almost weekly for about $40 to $50 a pop.  With the bike, I filled up my bike weekly for less than $8 bucks.
  • Savings: Hundreds on fuel and lets the side of me that likes a little heart-pounding adrenaline have a little fun, on the cheap!
  • Eliminated my commute - I quit my job as a Director of Information Technology and took a work-from-home position.  No more expensive commutes or wasting time sitting in traffic to earn money.
  • Savings: Hundreds of dollars monthly in fuel and maintenance costs, not to mention re-gained time to do what I enjoy.
  • Save, Save, Save - After so many years of only saving the minimum, I maxed out my retirement plan through my company and my wife and I lived entirely off of my salary. Ditto on my wife's retirement plan and she also devotes her entire remaining salary to our investment portfolio. Opening an IRA can make saving easier.
  • Savings: More than $80,000, annually, in total investment and retirement account saving.
  • Frugal lifestyle - No more expensive dinners (except when they are paid for!).  No more big screen televisions or blowing hundreds of dollars on the latest cell phones. We consciously turned off lights in the house and save energy and income whenever possible, which includes doing laundry during non-peek hours of the day, minimizing dishwasher use and keeping the heater at 68 degrees in the winter and air conditioner at almost 80 in the summer. Planning is key here, but it's so worth it.
  • Savings: Several thousand every year in reduced energy and useless entertainment costs.
  • Focus on the prize! - This blog is one way that I stayed focused on retirement and kept my motivation high and mind honed in on the ultimate goal of quitting the rat race by the age of 40. Staying positive is critical, especially during those times where you might want to splurge.  I keep asking myself if another year of working for a living is worth that shiny new "thing".
  • Savings: Infinite, as focusing on the prize helps ensure I never relapse back into my old self.

And, we also sold both of our homes and bought an Airstream travel trailer that we live in and use to travel the country. It's a super freeing lifestyle and we've found that we can make it nearly as cheap as we like.

Also, if we ever want or need to make money fast, we have the flexibility (both financial as well as location) to make it happen.

How much money do you need to retire by 40?

The obvious answer, of course, is – it depends.

How much money can you comfortably live off of for a year? If it’s $50,000, a good rule-of-thumb is to multiply that by 25 to see how much income you’ll need to save to comfortably retire for 25 years ($1.25M). And if your goal is to retire by 40 it’s probably a good idea to account for a longer retirement period. This will give you a good target to aim for when thinking about your overall savings necessary to achieve your retirement goal.

This calculation is helpful when planning for future recurring expenses (like food), but the elimination of any larger debt you have can mean that more of this retirement savings will go right back into your pocket. If you do have large sums of debt, a good way to chip away at them is by paying off the loan with the highest interest rate, first.

Financial Freedom is always smart

Once you make the intelligent decision to manage your money more effectively and retire early (or at the very least, financial independence), your life changes almost instantly. You no longer focus on "stuff". You soon find out what true happiness is all about and how powerful an optimistic attitude can be in leading you down the right path toward your goals.

Optimism is the foundation on which success grows.

But wait! What happens if you love your job (and income) and have no interest in early retirement? There's nothing wrong with that, but there still is incredible wisdom in achieving financial freedom.

There are several reasons why FI is important even for people who have no plan to retire by 40 (or any age under 65 or so):

  • Your organization might shrivel up and dissolve or relocate, or otherwise stop doing business in its current capacity
  • You may no longer enjoy what you’re doing in the future
  • You might watch a documentary about an underserved Ecuadorian school on television and would do anything to live there for a while and teach the local children English
  • You might have a family emergency, requiring months of time away from the office
  • Your next boss might totally suck, prompting you to contemplate slamming your head against a brick wall just for the few extra “workman’s comp” days off

In other words, things might change from the rosy awesomeness that they may currently be.

At one point, for example, I quite enjoyed what I did for a living. But in my business (Computer Science), the profession has a way of literally draining the life out of you. Even when I was making a decent income, each passing year I became less and less enamored with the idea of doing this for the rest of my life and retirement began sounding better and better.

And that's O.K.—things change. Your wants and desires morph over time and your ability to tolerate and feel genuinely happy with the way that we spend our time can, and probably will, adjust over time. Planning and getting yourself financially prepared for the future, with the realization that it might not look exactly like the present, is one of the wisest moves that people can possibly make.

So, why become FI even if you love your job and want to work forever?

Financial independence provides the freedom and flexibility to do anything.

Retire by 40 is more than just sacrifice

I love going out to eat. Genuinely love it. Every minute of it. And, that was something that I refused to give up when we decided to retire early. When you begin to think about financial independence and early retirement not through the lens of "sacrifice" but from the concept of happiness, things begin to get much easier to manage.

For me, it was restaurant spending (and still is!).

For you, it might be your annual purchase of season tickets. Or upgrading your wardrobe on the regular. Getting the newest cell phone every damn year. Whatever it is for you, happiness should NOT be sacrificed in order to achieve early retirement.

But, here’s the thing. You need to answer two questions during this process:

  • Do the things that make you happy REALLY make you happy? When I was younger, I drove around in a supercharged Corvette and also rode a Yamaha R1 sportbike—I'd earned it. I thought they made me happy. And in certain situations, they did. But fundamentally, I finally admitted to myself that they provided no genuine source of happiness in my life, and I spent way too much money on that mistake before I realized it. The things that you think are making you happy…are they? Really?
1999 Corvette Convertible
My former 1999 Corvette did bring me happiness…for a while
  • Are those things worth pushing back early retirement? Is spending money on the things that provide genuine happiness worth delaying early retirement in order to fund? If those things make you happy enough, it’s okay if the answer is yes.

The truth is, if the answer to the above question is yes, then it’s okay that your lifestyle isn’t some perfectly streamlined, well-oiled machine that cranks out impeccable little specimens every step of the way.

Here’s the key:

Optimize your finances to the point where personal happiness isn’t sacrificed.

Then, you’ve probably found the right balance for you.

To retire by 40, understand the things that make you happy. Then, tell yourself that it’s okay to spend money on those things because they make you happy.

Here’s the script to tell yourself:

I realize that if I reduce spending on certain things, I could probably retire earlier. But, it’s not worth it. Those things provide enough happiness in my life that I’m willing to continue spending on those things.

That’s it. Once we understand the source of our happiness, the way we spend our income begins to shift in a meaningful way…in a way that doesn’t feel like “sacrifice”, but still puts the wheels in motion to achieve our goals of early retirement.

If you are ready to put a stop to your days of working for a living, welcome to the club. Read through these pages, comment where you like, and start to truly enjoy life's virtues on your path to retirement.

Believe it or not, most of life's virtues are not "bought".