
How quickly can you retire? Part 1: The 10 second calculation
Posted by Dan Montgomery on 29 August 2018 in General Early Retirement
In my first post, I told a story about the Partners in my consulting firm. These people earned lots of money, yet they still worked well into old age. This wasn’t because they enjoyed the work, it was because their spending habits prevented them from retiring.
The majority of people live their lives like this. They believe that life is about working hard and earning as much money as possible. But because you’re working so hard, you deserve to treat yourself. Why shouldn’t you buy the nicest house on the block, the flashiest new car, or regularly eat at nice restaurants?
According to this common perspective, the role of work is earn money, and the role of money is to buy things that make you happy.
I’ll admit, even I held that view for quite a few years. It felt right to treat myself to nice things as a reward for working 80 hour weeks in a claustrophobic office. But I realised that, despite buying things I thought would make me happy, I wasn’t any happier.
Slowly but surely, I changed my perspective on the role that money plays in my life. I realised that money was a tool that I could use to unlock things that were important to me. That is, time to spend with people I care about and the freedom to focus on what fulfils me.
After this realisation, I had a bunch of questions: How do I manage money differently in order to unlock those important things? Will I ever be able to retire early? What sacrifices will I need to make? Am I being crazy?
And I’m sure you have similar questions, so let’s take a look at the very simple mathematics behind early retirement.