This article was originally was originally published on 31 March 2017

What do you think you would need in order to retire tomorrow? $2 million? $5 million? $10 million?

Most of us assume that, nope, there’s no way around it – we’re all going to be working until we’re probably 90 the way retirement age is going. We assume that there’s no way we could support ourselves if we stopped working, so we’re just going to have to deal with it forever.

It doesn’t have to be this way!

A while ago I listened to an awesome podcastTim Ferriss (my favourite lifestyle guru/podcaster/awesome dude) was interviewing finance blogger Mr Money Mustache.
Mr Money Mustache is the name of a blog run by an American guy called Peter Adeney. He describes himself as “a thirtysomething retiree who now writes about how we can all live a frugal yet Badass life of leisure”.
I’m a big fan of his philosophy (along with millions of other readers worldwide), and early retirement is a goal of mine, so I was really excited to listen to Tim’s interview with him.

It didn’t disappoint. Here’s what I learned from that interview!

Early retirement isn’t that far-fetched

Mr Money Mustache (hereafter referred to as MMM) retired in his 30’s. He defines his ‘retirement’ as no longer needing to work to pay your regular expenses.

He’s at the point where he has been so smart with his money that he can now fund his and his family’s expenses solely through the interest from savings and the dividends from their investments.

You might be thinking – well, that’s cool for him, but blatantly out of reach for someone working in retail or hospo and living in expensive New Zealand.

But it’s probably not quite as far away as you might think!

If you only pay attention to one bit of this article, make it this bit.
This is the really exciting bit.

He’s got a simple equation to help you figure out how much you need to retire.

Simply take your yearly expenses and multiply them by 25. 
Why 25? It assumes you could get a 4% return on your money, which is very doable.

For example, if your yearly expenses are $30,000 then you’d do $30k x 25 = $750k. 
If you had $750k saved up and your yearly expenses were $30k, you could live off that money forever. Every year you would keep enough of the interest/ dividends to fund your expenses.

Now, $750k is definitely a ways off for me and it’s likely a ways off for you too but it’s probably far less than what you were thinking. Forget your unattainable millions and billions – the key to early retirement could be much closer than you think.

Ok, wow. So how do you get there?

One thing MMM talked about that really resonated with me was optimising for happiness. What this means is you only spend more money where it would make you happier.

Sounds really simple, but it’s actually a pretty profound concept.

One of the ways MMM does this is by cycling everywhere. Literally everywhere, even to go buy the family groceries.
I definitely couldn’t do this as to be honest I just don’t like cycling and I live miles away from everywhere. I’d be saving on petrol, but I’d be hating every second of it. I’d rather pay for my car and cut down in other areas.

Even with the things we do spend money on, though, we’re optimising.
For example, we only spent $1,500 on our car. It can only pick up about two radio stations and barely has AC, but it does all we need it to do. We could’ve bought a $12,000 car but it wouldn’t be making us any happier or more fulfilled than our little Volvo.

Getting more than you truly need doesn’t make you correspondingly happier.

Is this removing a negative from my life

Here are a few things MMM talked about doing when there’s an expensive thing he’s considering buying:

  • Consider how much space it’ll take up in your house and whether you’d be happy to potentially be constantly falling over it. (I still have two drum kits taking up a room in my parent’s place, sorry mum and dad)
  • Consider how you’d feel if it broke or got stolen, and if the use you’d get out of it outweighs the cost of replacement
  • Wait a day or a week and consider if you really, really still want it (I know this can be really hard during online flash sales, but just think fast and smart!)

You might get a cheap little spike of happiness from having the new thing, but in a week or a month, your happiness will be right back to where it is today.

Most importantly, ask yourself: Is this truly removing a negative from my life?

I’m not talking the bullshit removal of negatives, like my girlfriend, who keeps telling me she needs a stand-up paddleboard to remove the negative of her not having a stand-up paddleboard (she’s gone paddle boarding once in her life and said it was stupid at the time because she was doing it wrong)She had the board back to front and kept going around in circles!

An actual negative we’ve removed from our lives is upgrading our shitty dartboard and darts. We’re big fans of darts, but having them constantly ping off the wires or fly at right angles was really putting a dampener on the game. Upgrading them has made us much happier and has reduced my dark muttering under my breath by 37%.

Another example is spending a few hundred bucks getting my website looking nice. It used to bum me out that my website looked a little shoddy and I worried that it was turning people off; these days I’m more proud to tell people about it and get them to check it out.

Optimisation will make everyone think you’re super cool and sexy

Well, maybe not quite so much, but optimisation (getting everything as efficient as possible) is probably one of the best things you could do to make your life easier.
He talks a lot about how most people spend far too much on groceries and other bills and describes how you can save an outrageous amount on your grocery bill by adopting a “calories per $” approach to choosing food.
This doesn’t mean you need to live off instant noodles, it just provides a better framework to think about food expenditure.
Reading this post left me nothing short of inspired. Inspired to cut down on my ridiculous grocery bill which I’d always justified to myself by saying I’m a big dude who needs his food.
It’s true that 6’8”100kgs needs a lot of feeding, but maybe it doesn’t need feeding $20 steaks …

Things to think about

  • What’s a negative you can remove from your life?
  • Have you always assumed you’ll be working into your 70s and beyond? Has this article rewired how you think about retirement?

Hope you enjoyed that! Check out the podcast here, (or you could just download it on your podcasts app). And for further reading check out MMM’s posts on early retirement and on cutting your food bill.

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