During the wee hours of the night as I rummaged through my Twitter feed, I ran across an article in Forbes about a man who actually did retire at the age of 30. That is not a typo… yes, I said 30!
“Most people wrongly focus on the income side of th[e] 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.”
The strategy, called Early Retirement Extreme is a combination of simple living, anti-consumerism, DIY ethics, self-reliance, and applied capitalism. The author Jacob, states:
“I became financially independent (meaning that all my expenses are sustainably paid for by investment income from my savings so I never need to work again unless I want to.”
I looked up ERE’s website immediately because I wanted to understand how he survives on $7,000 a year. (Jacob is married and they split the bills evenly.) Here’s a breakdown of his monthly expenses:
NEEDS
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$270/month rent+utilities. He lives in an 289-square foot RV, paid for in cash and recommends your #1 priority to be keeping your monthly cost of living (shelter + utilities) be between $200-$400/person.
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$95/month for health insurance.
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$75-100/month for food. He never eats out, cooks from staples like rice, beans, carrots, onions, etc. and never throws away leftovers.
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$50/month for half of the car.
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$50/month for half of the dog.
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$20/month for internet.
That’s it. No cell phone bill, no cable bill, no coupon clipping and no dumpster diving for food (if you don’t have a dog, replace that expense with your cell phone if you HAVE to HAVE it and move on!) The monthly total is $585 or $7,020 a year! And he lives in the bay area (San Francisco). GEESH!
So, let’s say you’re 33 now… and are wondering if you can retire, say at age 40. Let’s assume you live to be 80 and can stay pretty close to Jacob’s budget. If those two items hold, you need enough money for 40 years worth of expenses, or $280,800, ignoring interest. Let’s also assume your car will be paid off this year and the note has been $500/month. IF you save that $500 every month (from age 34-40, that’s 7 years), you would have $42,000, which is or 14.9% of your goal! And that’s with no lifestyle change AT ALL. Not bad, eh?!
Here are a few articles I ran across on Jacob’s website:
How to Retire in 5 years: 1) Find your motivation, 2) Get your priorities straight, 3) Stop spending money, 4) Turn off the TV and be resourceful, 5) Watch your bank account grow and 6) Multiply your monthly expense by 300 and compare it to your bank statement. Once the latter is higher than the former, you are free!
Then there’s the 21 Day Makeover:
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Day 1) Find a place to live in the $200-$400 a month/person range that is very close to work.
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Day 2) De-clutter – sell everything! I’m not a fan of knick-knacks and have would only WANT to keep my laptop, iPad, a few watches 1-2 handbags that I love. As it relates to clothes, I’m already a minimalist when so bring it on!
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Day 3) Go grocery shopping Jacob’s way! It’s healthier.
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Day 4) Ditch the cell phone plan… if you’re hooked, he suggests starting with a pre-paid plan. Being a technie at heart, I say switch to pre-paid, but keep the phone and just use Wi-Fi for all your favorite apps!
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Day 5) Find a free hobby. Try the library, museums, parks or festivals. More ideas here.
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Day 6) Buy used and keep only a few staple pieces.
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Day 7) Go car free (no note, gas, maintenance), plus it eliminates gym fees.
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Day 8) Find someone you enjoy being around, someone that motivates you… free entertainment!
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Day 9) Budget using 2 categories: Money I spend and Money I keep. If the former is great than the latter, you have a problem!
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Day 10) Calculate your net worth (what is owned minus what is owed).
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Day 14) Investing for early retirement. Read more here. If you’re risk adverse, you can use interest from safer investments like CD’s or T-Bills. You just need to do some simple math to figure out how much you can accrue.
Bri Alys, LLC 