Financial independence is not just for the “rich” or wealthy

Published December 9, 2015   Posted in How to Retire How to Save

A few weeks ago we received a comment to our September budget article from a young reader who was impressed with our plan of financial independence and early retirement, but quickly grew disappointed once she saw our relatively high income.


It is true that my wife and I enjoy a fairly high level of income, but do our salaries make it seem like retirement NEEDS a high income?

In September, my wife and I had a combined income just shy of $12,000. The commenter reported a combined income between her and her husband of $4,000. Surely, $8,000 makes a huge difference in early retirement, right? Honestly, yes, yes it does. But, does someone NEED to bring in $12-grand a month to retire early?

Before I continue, a word about the difference between retirement and financial independence.

I admit to using these terms fairly interchangeably throughout this blog, but the difference between the two is actually quite profound. What my wife and I are doing – similar to other “early retirees”, is we are becoming financially independent early in life. This means that we don’t HAVE to work for a paycheck to maintain our lifestyles – though we can if we personally choose to. Our wealth, acquired over a number of years of aggressive saving, has built up enough of a stash to support our lifestyles without the need for full time jobs.

And in general, I prefer to use the term “financial independence”, rather than “retirement”, as I believe that term is a much more accurate description of our planned lifestyle after full time work.

Though early financial independence is not a luxury designed only for high income earners, there is no getting around the fact that higher incomes make the whole early FI process quicker. However, that is not to say we NEED a high level of income before becoming financially independent early in life.

I’ve read similar comments both here on this blog as well as on others, like “Sure, if I pulled in $250,000 a year, I could retire early too”, or “If you want to retire in your mid 30’s, all you have to do is make hundreds of thousands of dollars per year.”

Umm, no, that’s not the way it works.

I love her comment, and it set the wheels spinning in my head once again about how influential our income is in our early financial independence plans. I have written before about the importance of saving and how income alone doesn’t really make you rich. It can, but it’s not automatic. Allow me to explain.

Is our high income enabling our early “retirement”?

Yes and no. A high level of income is definitely enabling our ability to quit our full-time jobs next this year. We could not quit this damn quickly (after changing our lifestyle just a couple years ago) if my wife and I made significantly lower salaries. There is no question that our incomes are enabling our ridiculously early financial independence schedule, and I would be a damn fool not to recognize that.

After all, both my wife and I want out, and out fast.

Financial independence isn't just for rich people? Woohoo, time to celebrate!

Financial independence isn’t just for rich people? Woohoo, time to celebrate!

However, there is more to financial independence than high incomes. My wife and I certainly would never be able to quit next year if we kept our previous spending habits in place either – even with our same salaries. Neither of us maxed out our 401ks at work. We weren’t throwing money into our brokerage account like mad. We went out to eat more often than we do now and even scheduled in more expensive “date nights” every month where dropping $100 for a meal was the norm.

We also drove two cars – one of which was a gas-guzzling Honda Ridgeline.  I commuted into an office every day instead of working from home. We paid for expensive cable television, hired a pool guy to keep our backyard swimming pool clean and also sent our dogs to daycare to the tune of around $400 a month. Not exactly a sensible lifestyle.

This point is important: While our high salaries are definitely enabling us to reach FI quickly, the underlying foundation of our ability to FIRE is a combination of income and saving. Had we not made these changes in our spending habits a couple of years ago, FI would be nothing but a prayer for us, some amorphous bright fog in the distant future.

Regardless of our incomes. If we spend $150,000 of a $200,000 yearly salary, nobody’s quitting early.

There is one other element that makes next year possible: our anticipated spending rate post-retirement, which is very, very low (around $30,000 a year). As I discussed in my Our Next Life article series, we will be selling virtually everything that we have and buying an RV to live in around the country. We will travel, find cheap land and live very, very inexpensively while enjoying this beautiful and wondrous country of ours.

Financial independence was, for many, many years, just a prayer. I’m thankful to have enjoyed fairly high salaries all my life, but I also had very little to show for it for all those years. I wasted the large majority of my income every year, and that habit killed my chances of upgrading my level of happiness for the first decade of full time work life. Time lost. I might as well have made half as much and saved the majority of it.

The bottom line: There are many people who have reached financial independence on far less than what my wife and I bring in every month, and FI looks different to everyone. It doesn’t necessarily mean that you’re simply “done working” for the rest of your life, or that your most productive years are behind you. Don’t let the retirement police bamboozle you.

There are any number of ways to design your FI lifestyle around what works best for you. For example, maybe FI means taking on some part time work every now and then for some additional income. Or, maybe house sitting abroad is your game. Others live an insanely low cost-of-living lifestyle in vans (Van Life, baby!). Believe it or not, there are a LOT of people who travel the country in a van and love every minute of it with only a mere fraction of our net worth.

While these lifestyles won’t be best suited for everyone, the larger point is that “retirement” does not need to look like the traditional American-approved picture of living without a job. There are so many lifestyles out there – don’t be afraid to explore your options.

What would we do if we made less money?

Let’s face it, we live in the lap of luxury. We have everything that we could possibly want and need, plus some. The backyard pool is outrageously unnecessary. Our glass-sharded fire pit is completely frivolous. The 1600 sqft home that we live in is way too damn big for our needs.

Of course, we bought all this before we decided to retire early. But still, it’s all unnecessary “stuff”.

Let’s say that we brought home significantly less money than we do now because one of us lost our jobs or suffered through the worst demotion in the history of corporate America. How would we manage our early retirement?

Last night's halo around the moon

Our home with a wicked halo earlier in the year

First, the easy part – we move. We already live in a very inexpensive part of the country, making our city a prime spot for future early retirees. Dry air, mild winters, sunny skies and a low cost of living. We’d move into an apartment or small house somewhere in town, perhaps closer to my wife’s work, to avoid the expenses of our unnecessary homestead compound.

Next, we would sell our Cadillac CTS and buy something small and cheap with excellent gas mileage, like a Honda Fit or something similar. I would probably keep my motorcycle because the mileage on that sucker beats 99% of the cars on the road today. For the record, we had considered selling the CTS in the past, but in the end our early retirement plans made that idea less beneficial in our situation – after all, we are selling everything next year anyway.

Then, we downsize even further. We have an extra refrigerator in the garage that we don’t really need. An extra couch here, backyard patio furniture there. I could easily lose some of my computer equipment that I currently enjoy in excess of what I need to get my job done.

Just “de-stuff” our lives.

We streamline our lives down to only those things that we need or genuinely bring us happiness, continue saving as much as we possibly can, but we still plan to reach FI early. Maybe “early” in this case means five years down the road. Maybe 10. It probably wouldn’t be next year.

The important point to remember is that while our schedule for early financial independence would certainly change, our ability to reach FI early need not be affected. Our goals remain the same. The only thing that changes is our schedule.

The truth is pretty remarkable – I don’t care how much you make, if you don’t save, you’re probably won’t be quitting early. Making lots of money is great and can definitely push up your early financial independence schedule, but unless that money is saved through a sensible lifestyle, early financial independence will remain just a dream.

We track our net worth using Personal Capital



Comments

68 responses to “Financial independence is not just for the “rich” or wealthy”

  1. A great point Steve. They same argument can be said for getting out of debt. It’s all about the sacrifices and saving you can make. In both cases extra income can be added too. Combing those two steps can be a powerful duo to accomplish just about anything you set you sights on.

    • Steve says:

      Thanks for the comment, Brian. Yup, I agree – debt works exactly the same way. Getting out of debt and retiring early is more about one’s lifestyle than about how much income one brings in.

  2. Mrs SSC says:

    Nicely put. We often get similar comments since we both earn a tidy sum also. It is allowing us to reach our goal more quickly. But, it isn’t the only path. I am surrounded every day at work by similar high earners – and I’ve only met 2 other people in my 8 years here that even think they could retire before 60. Being a high earner isn’t the key to FI, but having the right mindset and being willing to challenge yourself is.

    • Steve says:

      Thanks Mrs. SSC – appreciate the comment. Yup, I’ve noticed the same thing over on your blog. And I think you’ve hit the nail squarely on the head – “having the right mindset and being willing to challenge yourself” is the key to FI. Definitely agree!

  3. Ernie says:

    “I don’t care how much you make, if you don’t save, you’re probably won’t be quitting early.” Yep, you’re spot on. And there’s something to be said about the process. I often think, “Oh, if I just made more money this whole getting out of debt thing would be so much easier!” but I’ve found it’s through the struggle and the sacrifice that I’ve grown the most as a person. And sacrifice is something that anyone can make regardless of income.

    • Steve says:

      Hey Ernie – it’s absolutely true, making the right decisions with your money is far, far more important than the income that’s brought in every month. Of course, if you’re already making wise financial decisions, then more income is definitely better than less, but getting to the point of financial literacy should always be the first step. 🙂

  4. mark says:

    “I’m a millionaire. Been investing in mutual funds for 40 years. Never made more then $70,000. Paid cash for everything. Still have an allowance of $100.00 a week. That is for gas and if I want something new. I’ve been debt free for 15 years. I often sit back and ask how I did this, and then remember my mom who at 16 worked in the ship yards during WW2, never graduated from HS, but gave me a book called Your Last Dollar. I still live off of $40,000 a year and no longer work, outside of a part time job as a coach as I love high school kids.”

  5. Mr. SSC says:

    I have to echo Mrs. SSC and say that I work with plenty of people that earn dual high income salaries and are still paycheck to paycheck because they don’t know how to control their spending. Outside of their 401k contribution, they have zero put towards anything beyond maintaining their current lifestyles, which given the tradeoffs for them, aren’t as glamorous as you may think.

    I hear that same lament though, especially from my side of the family. They think it’s all about how much you have and not about what you do with it. My mom got a sizeable inheritance, ~$60k after tax, and she wanted us to advise her how to invest it. We went through some vanguard options for her, showed her the possibility of her return on investment in 10 years, and whatever she asked about. We couldn’t get her to follow through, and she ultimately blew it all in under a year…. Nothing to show for it at all.

    I think that, is the ultimate early retirement/financial independence killer right there is your mindset. Plain and simple. If you think it’s impossible, it will be, if you think it’s attainable, you’ll figure a way to get there regardless of your current situation.

    • Steve says:

      There is a LOT to be said for a positive attitude about life – it’s true that if you believe that something is achievable, you will probably achieve it. Determination goes a long way, and the ability to step outside of your comfort zone will definitely help you to remain focused on that goal and disregard conventional wisdom. Unfortunate about your mom’s financial decisions. I have a few members of my extended family that made similar choices with their money.

      If you keep doing what you’ve always done, you’ll keep getting what you’ve always gotten. 🙂

  6. I know that our high incomes *definitely* help us save faster, but I really believe spending is much more important than income, and anyone earning more than minimum wage can retire early with enough focus and determination. But you’re right — you might need to move, or make some sacrifices to do so, as well as slow down the timeline. Thanks for spreading the good word that this isn’t just for the wealthy!

    P.S. We have only been in the six figures bracket for the last few years… not like we’ve both been making that much for our whole careers. I made less than $30K in my first job! So thinking that it’s easy when making six figures assumes we’ve always made that much, which isn’t the case at all!

    • Steve says:

      Amen to that, ONL – spending IS the key to early retirement. And excellent point regarding the length of time you’ve been in the six figures. It’s only been a few years for me as well. Dual incomes definitely help too.

  7. Kate says:

    Great post.

    I’ve never earned a high income (and will likely never see 6 figures during my career) but still plan to have enough to retire comfortably at 50. I think my friends would be shocked at how much my net worth is, even though my lifestyle appears very similar to theirs on the surface.

    Not making a huge salary is just another excuse for someone who doesn’t want it bad enough to actually try. For these people, no amount of money will ever be enough because there will always be more things to spend money on instead.

    I’m so happy that I came across the PF community — makes me feel normal in a world of absurdity!

    • Steve says:

      Well said, Kate – the PF community has got to be the most welcoming group of people that I’ve ever come across. To us, saving money is normal. Designing lifestyles that might fly in the face of conventional wisdom is perfectly acceptable. Charting your own course? Yeah, encouraged! 🙂

  8. This is a point that definitely needs to be made! You often read comments where people dismiss the idea of FI for themselves because they don’t make as much as the person in the article they are commenting on. But it’s true that it can be done. I’m going to do it on a pretty average income. Even so, people would probably look at me and say “but she doesn’t have kids, she doesn’t have a mortgage, etc.”. The truth is that almost anyone can do it if they stop making excuses and prioritize reducing their expenses.

    • Steve says:

      Absolutely, positively, 100% correct, Miss GF – the prioritization of people’s future selves is absolutely critical to achieving the goal of early retirement. Once you want retirement MORE than the new iPhone, you’re well on your way to kicking some serious financial butt!

  9. YES! The entire message of our blog is that everyone’s path is different, but everyone can make it to financial independence/early retirement. We make significantly less than $100k/year combined, but we’ve charted a path that will work for us as well! It will take a big longer for us, and yes, we could make more sacrifices to get there faster, but we’ve figured out what is a good balance for us so we can enjoy life now and still make it to financial independence in 6.5 years!

    • Steve says:

      Amen to that, Maggie – everyone’s path definitely is different, and it should be. That’s what makes life and friendships interesting. If everyone was the same, this would be such a boring place to live. Good for you for finding the right balance for your family. 🙂

  10. Tawcan says:

    Great points. Having a high income definitely helps but only if you can get your spending under control. If your spending is out of whack, there’s no way you can reach financial independence. Having said that, given similar frugal lifestyle, a couple with higher income level definitely can reach FI faster than a couple with lower income level.

    FI is reachable if you put your mind to it. It’s simple as that.

  11. Jason says:

    One more thing I would add is that it is never too late to start. Most of the blogs that are in the PF sphere are people in their 20s, 30s, and even early 40s, who are much further along than I am. The truth is we probably won’t reach FI until 50 b/c of a high amount of debt and I didn’t start my career until my early 30s. That said it isn’t too late, particularly when you think about the freedom that it can buy you. And I find that with my job I don’t have to deny myself much in terms of travel and other things b/c it is part of what I do. I admit I am a little jealous and disturbed that I didn’t discover this stuff 10 years ago, but better late than never. And once you start down the dark path forever will it dominate your destiny (I can’t wait until Star Wars comes out next week).

    • Steve says:

      That’s very, very true Jason – it is never too late to start. Even a retirement date around 50 is still much, much sooner than MOST of your peers, because you “saw the light”, as it were. Better late than never is exactly right. 🙂

      Oh, and enjoy Star Wars!

  12. >> “I’ve read similar comments both here on this blog as well as on others, like ‘Sure, if I pulled in $250,000 a year, I could retire early too'”

    I agree, of course, that making more money can make it easier to retire more quickly; it’s certainly helping me. But there’s a fundamental misunderstanding of human nature in this statement that makes it untrue for most people: the assumption that, presented with a substantially higher income (and the work environment and social standing that goes with it), said commenter would not inflate his or her expenses. While it’s possible (the whole FIRE community is evidence of that), it’s definitely not common.

    Most people I know, whether they make $20k/year or $200k/year, spend 80%+ of their income. Without a guiding financial philosophy and a focus on savings and financial independence, there is always opportunity to “upgrade” everything: upgrade your house, your car, your meals, your clothes, your vacations… upgrade it all until you’ve spent every bit of that higher income.

    There’s also the social component of making more money. When I was 18 years old and earning $7 an hour working in a coffee shop, there was near-zero social pressure from my peers to own fancy things or live an expensive life. We were all generally in the same situation. Maybe one of my coworkers had a fancier phone than the rest of us, but that was about it. Back then, it would have been easy to say, “Of course I could retire early if I made 10x as much.” Today, I make well in excess of the coffee shop wage, but my peers are completely different: I work and socialize with people who drive BMWs, own mountain vacation cabins, and have personal trainers in their homes every morning. My peers’ ideas of fun weekend activities aren’t “let’s have a potluck and play board games,” they’re “let’s fly to Aspen for a ski weekend.” I’ve had multiple coworkers shame me for driving a 12-year-old sedan. “Wow, you’re still driving that thing? You make enough to get a better car.” It’s not impossible to resist all this peer pressure (my spending is still closer to coffee shop income level than today’s income level), but it’s exponentially more difficult when the people around you every day are living the “big earner, big spender” lifestyle.

    • Steve says:

      Wow, you rocked that comment, Matt. Appreciate you taking the time to write!

      You hit the nail on the head with the apparent assumption that someone with a high salary will save the large majority of it. The fact is human nature itself runs against that assumption. Regardless of income, people find a way to design their lifestyle around their income, and when that happens, lifestyle inflation occurs. Thus, even when you’re graced with a raise or bonus at work, that additional cash is subsumed into the lifestyle and never really gets most people ahead.

      The “big earner, big spender” lifestyle, for sure – another “keeping up with the joneses” casualty. You make enough for this. You may enough for that. But, what happens when I don’t want this or that? What if I just want to retire and spend my remaining life enjoying my time on this earth?

      🙂

  13. John says:

    Financial independence (FI) is a math equation, not simply an income issue. Your savings rate (and investing results) determine when you achieve FI, not how much money you make.

    Most people raise their spending to match the increase in their income – “lifestyle inflation” would be the term to use, I suppose. So the family making $250k is no closer to independence than the family making $50k because they are both spending most (if not all and then some) of what they make. However if they would moderate their lifestyle inflation (and save/invest the difference), FI is achievable by many, many more families.

    In our case, we were blessed with a successful freelance self employment opportunity that grew our income significantly over a few years. We kept our lifestyle in check, though. Make no mistake, we certainly spend more now than we did in the “good old days”, but the spending didn’t raise as fast as the income. Now that my freelance accounting work has slowed (by my own choice), my income has dropped, but because our personal spending was low (relative to my old income), we haven’t had to adjust our lifestyle one bit. And all of the extra savings we invested over the years has grown enough to allow us to achieve FI.

    If we had instead chosen to blow through the extra income with higher consumption, we wouldn’t be in the situation we are now. The growth in my income did allow us to hit this goal earlier than planned, but we hit it because we CONTROLLED OUR SPENDING – not just because I made a high income!

    Thanks for your post.

    John

    • Steve says:

      Thanks for your comment, John. Looks like you made a wise decision to keep your lifestyle in check even as your income was on the rise. It feels good knowing that you still have the majority of the money that you’ve made over the years rather than it dissolving in thin air with a bunch of crap lying around your house that you no longer use. 🙂

  14. Simple Saving says:

    Steve, you would never get this same positive response out in the real world. Unfortunately most people would take one look at your salary and say you are full of shit when you say financial independence isn’t necessarily tied to your income. Clearly, your salary makes it easier and quicker for you now that you’ve “seen the light”, but the naysayers (jealous consumption driven people) will only use that as an excuse as to why they’ll never reach financial independence. I guess my true comment to any of your young, lower salaried readership is this: Listen to Steve!!!! He is absolutely 100% correct! It’s all about the choices you make. Realize early on that true happiness comes when you have freedom, not when you have a lot of stuff. Tune out the noise when your friends, family and coworkers tell you that you are silly for not wanting a bigger TV, a better car, a new cell phone, a bigger house, blah blah blah. Financial Independence at a young age (40ish) is actually quite easy to achieve on very modest salaries, all you have to do is want it bad enough!!

    • Steve says:

      True that! All you have to do is want it bad enough. Prioritize your retirement over spending money and the rest really does tend to fall right into place. But, nobody can make people want it. That’s on them. That is their choice to make.

      Appreciate the comment, SS – thanks for taking the time to write!

  15. I’m so jaded because I live in NYC and my bosses all make multiple six figure salaries. They have wives that don’t work, few kids at home who play every sport known to man, a seven figure primary residence, a seven figure summer house, etc. So although to outsiders I make a nice income, when I’m at work I feel like I make a pittance. But the difference is although they may make at least 5 times as much as I do, I most likely save a bigger portion of my income, and therefore math says I could be financial independent faster. There is proof it’s all about the spending 🙂

    • Steve says:

      I know the feeling, Fervent. The CEO of the company that I work for lives in a $15m compound in California – perhaps the most expensive place in the United States to buy something that big. Clearly, the dude makes a ton of cash, but he also spends a ton of cash, too. Who is better off, him or me? I don’t know his complete financial situation, of course, but all I can say is that I’d much rather be retired than rich (and still working).

  16. Ah goodness, the assumption that higher income/salaries grant you the keys to financial independence could almost be deemed a fallacy! Okay, maybe not that extreme – but it’s definitely eliminating out every factor & not grasping the whole picture. Saving, lifestyle habits, your mindset on money also are huge components of being able to accomplish financial independence. This is tough though, because from a social standpoint the idea of “Well, if I had that much money…” or, “If you had a million dollars, what would you do?” are incredibly prevalent. How do you turn away, and learn to divert from these “standard” thoughts & questions? Developing habits to live on less than you earn, actually save what is yours, and recognize what you truly need to live are all essential to financial independence. While earning more can certainly be a portion to help you get there, that’s only one part of the puzzle. Very thoughtful post, Steve. 🙂

    • Steve says:

      Thanks Alyssa, appreciate the kind words. I think you’re right that it’s developing the right habits that make this process so much easier – in fact, I think I’m going to write a post about that in the future. Habits are incredibly important, and spending significantly less than one earns may be the most important habit of all. 🙂

  17. Jaime says:

    They should read a book, buy it used as its out of print, called “Stop Working . . . Start Living: How I Retired at 36 (Without Winning the Lottery)” by Dianne Nahirny. She retired around age 36 and never made more than $25,000. She published her book in 2001, and she lives in a Tudor style house, so it’s possible. I read her book.

    She tried going to college didn’t like it, then tried going to community college, and didn’t like it. In the end she didn’t want to spend her parents money for a degree she couldn’t use most of her life. Instead she went to work, she got jobs in accounting offices, as a bill collector at one point, another time she worked at a theater selling tickets to customers. During this time she saved, invested, and spent some of her money. She wasn’t just hoarding it. She did indulge but she didn’t go crazy.

    Her parents helped her a little by helping her finance her mortgage. I don’t remember exactly how it’s been awhile since I read it. I think she may have paid them back though. Don’t remember. It doesn’t matter, because for those of us that live in first world countries, have a healthy body and sound mind, and the opportunity to work then FIRE is possible.

    You can feel sorry for yourself and feel envious or you can start putting a plan together. Yep so most of us aren’t born rich, too bad so sad, we can’t just sit around feeling sorry that we weren’t born to rich parents.

    Besides look at all those movie stars and sport stars, I’ve read about tons of celebrities from the 1920’s to the present day, I’m a huge history and celebrity buff, that made millions and spent it all, not all did that, but many did, so really it’s what you do with what you have.

    • Steve says:

      Thanks for your comment, Jaime! It’s true, there are so many sports and movie stars that just blew through their stash because their lifestyles matched their income and apparently didn’t realize that all the stuff they bought needed to be maintained even after their earnings stopped. Weird how that happens.

      Thanks for the book recommendation. I’ll be sure to look that one up.

    • Jack says:

      Wow, I read Nahirny’s book in 2003, and I then started my plan to retire early. I was 28, my original plan was to retire at 37. Now plan to retire next year at 42. (5 years ago it was right in the middle of the financial crisis which hurt me very badly – while I recovered and more since, I seek additional cushion).

      If I remember Nahirny’s story correctly though, she built most of her stash from real estate gains. She acquired something for like 300k$ in Toronto, and sold for 600k$ (I’m throwing numbers) a few years later, then moved and acquired something else, also sold for a profit, then moved in a small city. So while I found the story inspiring and she indeed also saved, lived frugally,etc., I generally find stories involving real estate to be less replicable and closer to business success stories: they are great, but cannot be replicated by everyone.

  18. Brian S says:

    My 2 cents is to invest half that cent early on right out of school know matter what you make.
    My first house I bought was not for me it was an investment in a 4 plex live in one rent the rest.
    Invest in your 401k to get your match.
    Most people live above or at there income
    Example one of my tenets drives his BMW to drop off his rent check!
    Go to any Starbucks and 90% of them should not be spending $5 on coffee.
    Will be free @45

    • Steve says:

      I totally agree, Brian – spending $5 for a cup of coffee just seems really, really strange to me. And yep, the earlier that we begin to invest, the earlier we can quit the rat race and retire early and start enjoying our lives, job free!

  19. I agree that high income speeds early retirement but it’s still possible with lower incomes if you spend less than you earn and are willing to continue that lifestyle. We have been on one income for several years while I’m home with little kids and, not counting future increased income, can probably “retire” 10-15 years earlier than average.

  20. Jason Fieber says:

    Steve,

    Couldn’t agree more. It’s not what you make; it’s what you keep.

    For most of my journey to financial independence, I worked at a car dealership. I scaled my annual income up from about $40k back in 2009 to somewhere around $60k last year before I “retired” from my career in the auto industry. And I’m on pace for FI before 40 years old, which should make the journey somewhere around 10 years long, from start to finish. So it’s certainly not necessary to snag a six-figure income or whatever. But I live in a very modest apartment. I don’t own a car. I live a fairly frugal lifestyle.

    The key to it all is adjusting to your goals, expectations, and expense level so as to put your savings rate at a number necessary to get to where you want to be. If you don’t have that fundamental lifestyle already in place, you’ll never get there (regardless of your income). Of course, every incremental dollar helps once you have the expenses locked in. If you’re able to fight lifestyle inflation, then every additional top-line dollar goes straight to the bottom line. And in that case, a higher income will definitely get you there faster. But it’s not necessary. And I personally find the audacity to believe to be more important than anything else. If you don’t believe it’s possible, it’s not. Conversely, if you believe you can get there, you can. Once you believe in it, you’ll do whatever is necessary to get there. At that point, nothing can stop you.

    Cheers!

    • Steve says:

      Very well said, Jason, and you are testament to what a solid saving strategy can do for your life. You’re rocking the frugal lifestyle, and your future self will definitely thank you for it! 🙂

  21. Stockbeard says:

    Good points throughout the article, but in the case of that specific reader, I would also try to add a few points about the possibility to make more. $4000 a month for two income earners is definitely not on the “high” end of the fence. They’re in a position where side hustles could significantly improve their earnings. Everyone’s situation is different, and, if they have kids, it might not be doable for them, but if they are DINKs, they must have lots of free time lying around that would help them to start working on side gigs.

    Increasing the savings is *key* to Financial independence, but increasing one’s earnings is the best second step, once you have sound saving habits, to accelerate the whole process, IMO.

    In other words, in their case, I feel it’s not only about savings, but also about finding ways to make more.

    Thoughts?

    • Steve says:

      Hey Stockbeard – yup, I definitely agree that in their case, additional income through side hustles is probably an appropriate element to consider. But, I wanted to hit more broadly at the larger point that even if they made 10-times the amount that they do, if we don’t save our income, early retirement will always be a lost cause.

  22. Diego says:

    Your post absolutely nailed it. Back when I was living in the US. I was single making 5k a month and I figured out that I could only save 100 a month. Plenty of credit cards and debt.
    Now living in Europe. Married with 2 kids making 2k a month. Debt free and 40k in savings.
    It is not how much you make more than how expensive your lifestyle is.

  23. ARBM says:

    While a higher income definitely would make anyone’s journey towards early retirement easier, the only way to actually get there is to be focused and make it happen. And with the right motivation, that can be done on any income. I am a case for what happens when you don’t have that goal and you just drift along, following the expected lifestyle inflation with the increases in my income… I am only now trying to quell the upward trend and slowly bring things back to the point where I’ll be able to make early retirement a reality. It will take sacrifice, and careful planning, but I know that it will be possible. And if it is slow, it is only because I am not willing to make the sacrifices required to speed it up.

    • Steve says:

      I love your attitude about this, ARBM. It’s true, if we fail to achieve our financial goals, we probably need to look at ourselves first and foremost. While circumstances may have made it more difficult than we had original planned, we can control how we react and adjust more than what most people would care to admit! 🙂

  24. Jack says:

    Good points. As the cliche goes – failing to plan is planning to fail – and it’s a cliche because it’s true.

    Anyone can become financially independent with a radical enough lifestyle change. But managing it on a low income, with a family, in an expensive area is surely a challenge.

    Ultimately, it comes down to choice. And to become independent you need to make the hard choices and trade the present for the future.

    How you do that is up to you.

    • Steve says:

      That’s true, Jack – there are so many different ways to skin a cat, just like retire early or generally the principle of saving money even if your goal isn’t to quit the rat race early. The choice is entirely ours!

  25. […] One of the bloggers I love to read, Steve at ThinksaveRetire,  is part of the “DINK” clan. Steve is in general pretty humble about his situation and often acknowledges that being DINKS has helped him and his wife reaching financial independence faster. […]

  26. […] While a respectable salary is helping me to retire on my schedule, one certainly doesn’t need a high salary to retire early. It helps, of course, but early retirement can be achieved on almost any salary. Yes, it may take […]

  27. Great post and describes where my wife and I are.

    High salaries, but very high spending. I recently realized, like losing weight the spending (diet) is more important than making more $$$ (exercise).

    If you cannot live more frugally, making the $250,000 per year won’t lead to FI. We are in the process of cutting costs, as you did, but are still years away from getting sub $50,000 per year in expenses (at least 5).

    • Steve says:

      Congrats on recognizing the problem and actively striving to fix it. You are already ahead of a great number of people who refuse to accept the damaging behavior of their spending habits. 🙂

  28. Great article, love the emphasis on saving! “It’s not what you earn it’s what you save” that matters most. Making more $ is just part of the equation, all about saving more of it.

    • Steve says:

      Thanks Super Millennial, appreciate the comment. Saving really is so damn important. It’s nice to make a lot of money, of course, but if you don’t save it aggressively, nobody’s retiring early! 🙂

  29. […] Don’t let anyone tell you (or imply) that being smart enables early retirement. It doesn’t. While it is true that those with higher IQs tend to make more money, big paychecks don’t enable it either. […]

  30. I agree with most of what is said here BUT, there seems to be a lack of talking about family expenses and how it relates to “retirement”…….that would be kids. Yes, I have read all the blog articles about families with kids that live off grid, travel and home school etc. The reality is….families with kids have a large expense in raising them, providing for experiences as they grow up, sports, school activities and the all too dreaded college costs. Combine these costs in a high expense area of the Country (Bay area here) and it does impact the ability to get to your number. OK, OK, we could move….but, we choose this area due to many reasons. I’m very happy to provide a good up bringing for my kids, expose them to sports, support activities with their friends etc. I’m very pleased to say that our deferred “retirement” date will mean our kids (2) will graduate with zero college debt. The balance key is the ability to find a job that gives you a good work life balance that you enjoy…..Sorry to ramble 🙂 Steve

    • Steve says:

      Hi Steve (cool name, by the way)!

      I definitely agree, kids add another element to consider – both in terms of space and the financial responsibilities of raising children. While people do living in some incredibly small spaces with kids, that kind of situation definitely isn’t for everyone. In the end, we need to do what is in our best interest…whatever is best for us. The work/life balance is absolutely key.

      Thanks for your comment, and no worries about rambling. Some of the best comments that I’ve ever received could be perceived as “rambles”. 🙂

  31. Really nice post Mr. Steve. My husband and I have been living the frugal life since we got engaged. Since then it has been an adventure learning to live within our means, buying our first house, and trying to work everything out financially and we learn a five things. If you have positive mindset and action, then you will get positive results. You will know when you are using your finances the right way if it makes your life EASIER and not HARDER. If you want to live a happy and fulfilled life, never compare yourself to other people. It is not how much money you make. It is how much money you save. Adjust lifestyle to your income and not the other way around. Learning from other people’s mistake is the best experience. Debt is never the root problem; It is a symptom of something else-either: greed, ignorance, impatience or self-indulgence. Best luck to you Mr. Steve.
    Gwyneth Clover recently posted…Health and beauty benefits of pears

    • Steve says:

      Thanks for your comment, Gwyneth! I definitely agree that a positive mindset is critical to living a happy life, regardless of your financial circumstances. And yep, adjust your lifestyle to your income! Couldn’t have set it better myself. Definitely sounds like you have your head screwed on straight. 🙂

  32. Tina says:

    Hi Steve,

    I’m new here, just found your RV blog on YT and reading some of your posts here.

    As most others have said it does come down to what you save. I think a big part is as you do start making more money, get that bonus, tax refund is to spent it and not save. In the last 16 years as I’ve made more money which is not a lot, I’ve paid off all my debt, saved, and did not upgrade my lifestyle and waste the extra money. Still have the 16 year old car and small 2 bedroom house. It will take me a little longer for FI but I will get there 🙂

    Looking forward to following along,

    Tina

    • Steve says:

      Hi Tina! Thanks for your comment. Income is an important element of building up your net worth, but like you said, you gotta save it. Without saving, it doesn’t matter much how much you make because you’ll never truly get ahead that way.

      Nothing wrong with driving a 16 year old car if it still runs well. Driving that car instead of a new one is definitely helping you to achieve your financial goals faster.

      Thanks for your comment!

  33. Mike says:

    Great article. The truth is that how much money you make is 20% of the battle, how you manage it is 80%. You guys have done a great job! Enjoy your well-deserved retirement. You’ve earned it. Your BMW-driving, massive-house mortgaging co-workers are going to be working until 65.

    • Steve says:

      Thanks Mike! Sadly, you’re probably right. If they truly enjoy their jobs then there’s nothing necessarily wrong with working that long. But, most people don’t. I sure didn’t!

  34. mark says:

    This is me I’m at 2.5m If I can do it you can to.
    “I’m a millionaire. Been investing in mutual funds for 40 years. Never made more then $70,000. Paid cash for everything. Still have an allowance of $100.00 a week. That is for gas and if I want something new. I’ve been debt free for 15 years. I often sit back and ask how I did this, and then remember my mom who at 16 worked in the ship yards during WW2, never graduated from HS, but gave me a book called Your Last Dollar. I still live off of $40,000 a year and no longer work, outside of a part time job as a coach as I love high school kids.”

    Look at that! An average guy making average money with not-so-average results. And people say it’s hard to become a millionaire, pssh…. you just need a simple plan and some time 😉

    Let’s go over all 11 tips he dropped in this jam-packed paragraph – did you catch them?

    #1) Invest for the long haul! Not for two or three or even ten years, but for decades. Mark did this successfully for over 40 years (longer than most of us have been alive- hah!) and he kept going through all the booms and busts and utter nonsense. You need this long term mentality so you don’t trick yourself into chasing the quick wins and get off track. It’s all about harnessing time!

    #2) Funds get the job done. Yes you can try your hand at stocks and get your research/luck on and pray you hit the jackpot, but let’s face it – not even “professionals” get it right. For most people, sticking with mutual funds (or my personal preference – index funds – since the costs are much cheaper) are a safer bet. You won’t “beat the market” and have bragging rights amongst your friends, but matching it is better than underperforming it. And it’s one area I don’t mind being average.

    #3) It doesn’t matter how much you make – you can still save! While $70,000 is surely a lot of money for most of us/the world, keep in mind it’s not the case when you’re nearing retirement. And even so, it probably took Mark 10-20 years to make it up to that level, so for decades he was making substantially less. Regardless, putting money aside every paycheck no matter how much you make WILL add up over time and especially over 40 years. Do the best you can with what you’ve got, and then up it every time you get a bonus or raise or any other types of promotions. Mark is proof that any of us can become millionaires over time.

    #4) Pay cash for everything. Imagine never going into debt again? How much time, money, stress that would save? Using cash is surely one way to ensure that. You may not reap as many c/c rewards that way (and in full transparency – I’m a credit card budgeter myself! Where I put everything I can on cards and then pay them off in full each month!), but for the general public cash is the safest way to go. And plus, the research always shows that you spend less using cash than plastic anyways.

    #5) Give yourself a weekly allowance. This is one of my all-time favorite budgeting tips. Not only do you give yourself some fun BLOW MONEY to do as you please, but you also free yourself from having to track every last penny and burn yourself out. Another nice side effect is tricking all your friends that you’re a “normal” person just like them, when deep down you’re as financially nerdy as it gets 😉

    #6) Become totally debt free. He didn’t outright say, but I’m assuming that “being debt free for 15 years” means Mark doesn’t have any mortgages either. Which of course can never steer you wrong, whether you could make more money investing or not. I only know one person who regrets paying off their house, and I shake my head every time I’m reminded…

    #7) Appreciate how fortunate we are to live in today’s world! Where we reap the benefits of those who fought and died before us, and which the life expectancy is much higher than it’s ever been before. Not to mention how 9/10ths of our problems really are 1st world issues, and that we can live off a lot less and still – shockingly enough – be just as happy.

    #8) Read about money. You’re obviously already doing this or else you’re on the wrong site right now – hah! – but books and blogs can REALLY make an impact with how you think and act with your money. Especially when you find the ones that click. (Shameless plug – check out our list of favorite blogs here, as well as my favorite money books!). I tried to find this book that Mark’s mom gave him so I could check it out (I’d never heard of it before?) but didn’t have much luck. Although there is a “Your Last Dollar and How to Keep it” by Edgar T. Isaacs and Richard S. Lindner from 1976 which could possibly be it. If you want to take a gamble, it’s currently a whopping $3.40 right now on Amazon 🙂

    #9) Live off the same amount of money as time goes on! You know when you get a raise or new job and all of a sudden you’re earning more money than you ever have in your entire life? And so you go out and buy new stuff and are now all of a sudden spending the same amount of money as you’re earning? That’s called lifestyle inflation and it’s one tricky bastard. Catch it early on and get used to spending roughly the same every month and your pile of cash to save/invest drastically goes up over time. You don’t have to save every last penny of it of course (you still want to live a little, yeah?), but getting into this habit now will help you reach financial freedom a lot sooner – I can promise you that. Because remember: the less you need to live on, the less you need to retire!

    #10) Do stuff you love for money. Even though Mark has enough money to live off right now, he still does stuff he enjoys that also happens to pay. Imagine if everything you worked on brought you joy like that? It’s a great position to be in, and there’s nothing saying you have to stop earning once you give up your 9-5. Figure out what you’re good at and enjoy, and then see if there’s any cross pollination you can land on and start working it on the side. Many of the side hustles we share here were born out of specific interests that turned out to be pretty profitable – the perfect combination 🙂

    And lastly, #11) The boring stuff works. You’ll notice there wasn’t anything new or sexy going on with our friend’s plan here at all. He just kept his expenses in check, funneled away as much as he could over the years, and then let the magic that is compounding do the rest. It’s not always easy, but it’s do-able! And I reckon Mark would say that any of you could become a millionaire too by copying

    • Steve says:

      Thanks for that epic comment from Jay’s post about you, Mark. Your financial achievements are definitely impressive. It really does go to show you that you don’t *NEED* a huge salary to amass some seriously respectable wealth! 🙂

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