Controlling what you spend has some benefits. Forbes talked to two extreme early retirees and developed a three step process that could work if you don’t mind forgoing some of the finer things.
Here’s the three-step process Fisker, Mr. Money Mustache and others recommend to pull it off:
1. Embrace a very frugal lifestyle. That means cutting back substantially on biggies like your home and car expenses as well as learning to cook (to save on dining out and prepared foods) and to do more things yourself rather than pay someone else to do them.
2. Save like crazy — ideally at least 75% of your income — and invest the money. Put another way, if you can live on one dollar out of four and invest the other three, you’ll save enough money to cover three years’ worth of future expenses in just one year.
3. Once your investments are sufficient to support that very frugal lifestyle for the rest of your life, consider yourself free to retire. Fisker sets the savings target at 25 to 40 times annual expenses, depending on how many years you have ahead of you.
The story goes on to point out that preparations for retirement shouldn’t be focused entirely on the income side of your budget.
Most people wrongly focus on the income side of this equation, he says. “They want as much income as possible in retirement, to ensure the happiest possible life. What they are missing is that happiness is almost completely unrelated to how much you spend.”
Mustache maintains that with a bit of learning and reflection, almost anyone can learn to live happily on half of their take-home pay or less. That “allows savings to compound and set you free rapidly.”
Skeptical? He suggests a trial run.
“Try some experiments in your own lifestyle that cut down your costs and watch the surprising results on how happy you are,” says Mustache. You might wind up driving less, walking more, cooking more and spending more time enjoying nature rather than costly leisure activities, he adds.
Interestingly, the activities that extreme early retirees recommend for saving money bear a strong resemblance to the things many of us look forward to in retirement anyway, such as cooking, gardening, walking and biking.
Their choice to live in smaller homes and not be “owned” by possessions also fits nicely with the attitude many of us adopt as we get older (and, we hope, wiser).