BlogPersonal FinancePhilosophySpecial Edition PostsWhy to Invest

WLI’s Guide to Financial Freedom

save money when traveling oslo norway seaside early retirement

Early retirement may be one of the most misunderstood concepts involving personal finance. Of course, to those who’ve spent any time reading blogs on the subject or contemplating financial freedom, the phrase is accepted for what it encompasses: something simple but profound, structured but freeing.


We’re going to walk you through the idea of early retirement, what it entails, and how to achieve it.


So, let’s set the record straight.


How is the name deceptive? Well, early retirement hardly resembles most people’s image of retirement. When you hear the word, do you picture sandy beaches, cocktails, structureless days of non-stop pleasure and a happy, barefooted, gray-haired, white couple wearing khakis and pastel shirts? Media hype around well-known bloggers such as Mr. Money Mustache brings headlines like, ‘This Man Retired at 30 and Wants to Tell You How to Do It‘ that give little acknowledgment to the fact that early retirees often spend much of their time working.

backblaze cloud backup storage


Early retirement is financial independence. Early retirees are individuals or couples who have no need to work for money. They are financially independent because they lived below their means, diligently saved and invested, and can now pursue whatever they wish. Because they used a little bit of foresight, they can now trade obligations for opportunities.


Imagine a life in which you make no decisions based on prices or paycheck sizes. In which you can pursue a career as a songwriter, baker, or candlestick maker without fear of earning too little money. In which you can start a fledgling charity or non-profit that can forward all of its revenue to those in need without wasting money on your salary. In which you can learn a new skill, pick up a hobby, and create your own schedule to accomplish all of these things.


Financial independence is not about having money to buy things, but rather the freedom to act on your values. If you have or plan on having a child, it may have occurred to you that children’s schedules are very different from those of adults. Wouldn’t you prefer not to work nine-to-five, but rather be home to greet Junior when he gets off school at 3:15? Imagine taking his entire three-month summer to travel the world as a family. And still want a 9-5 desk? Money certainly won’t stop you from having that, either!


You get it. You don’t kick back on a beach and sip margaritas every day, you just rearrange your life according to your values and your desires without being subject to an employer’s demands, schedule, or paycheck. It’s acheivable by doing a tiny amount of planning ahead. We’ll show you, but first…


Here’s a silly photo. We stole it from this website.


Senior Couple Enjoying Beach Holiday Running Down Dune wonder learn invest early retirement


How is it even achievable?


We first turned to the ever-wise Mr. Money Mustache for this answer, but we’ll give it to you here. Aggressive wealth-building comes from living not just within your means, but well below your means. It comes from cutting out unnecessary spending, determining your own values, and then creating and committing to a plan. Realistic advice? Let’s go.


Eliminate debt.


As any Mustachian knows, any debt is an emergency. If you are in debt, start breaking its knees with a baseball bat now. In the USA, even fancy-pants, low-rate, government-subsidized student loans carry interest rates of above 4%! What the {expletive removed} !? Eliminating debt should be your first step toward building wealth and attaining financial freedom. The sooner you aren’t under the thumb of financial institutions, the sooner you’re in charge of your own life.


Don’t even think about carrying a balance on a credit card. Not only do CCs carry enormous, wallet-demolishing interest rates, they’re immoral tools that facilitate gross, unearned excess. If you can’t afford something, don’t buy it. If you’ve got $1,000 and want a $1,200 laptop, don’t buy it. Save the money you need and then buy the thing (if it’s actually worth buying).


Carrying a balance on a credit card is nothing more than lying down in front of a financial institution and saying, I’m unable to spend within my means, I’m desperate to buy something I can’t afford, and I want you to spend the next several years exerting your financial and emotional power over my weak, materialistic mind. Keep your power, reject the financial institutions who are desperate to take control of you and your money. (Please use credit cards to earn points, though! Just never carry a balance.)


And while you may have a debt with a rate of 4% and want to divert money to an index fund that you believe will pay 8%/year long-term, we still suggest killing off the debt first. Because not only does the debt have a guaranteed financial downside (as opposed to the unpredictable upside of investments), it brings emotional burden. Debt is the reassignment of your own agency. Destroying it rebuilds your power, not just your wallet’s thickness. One exception might come when contributing money to an IRA, which has enormous tax benefits and a yearly maximum contribution that you can never go back in time and reach.


Stop spending.


It sounds easy (to us) but requires some adjustments to your lifestyle. When you know that investing $5.75 each week can earn you more than $200,000 over 50 years, you’ll have no trouble finding the motivation to save and invest every dollar possible. We won’t go into every possible money-saving technique here, but use Google, our blog, and your brain. Briefly, however…


If you’re driving your car everywhere despite owning a bike and living near your destination, you’re doing something wrong. If you bought your car new, not used, you’re doing something wrong. If your car is larger than it should be (it is), you’re doing something wrong. Eating out more than a couple times per month maximum? You’re doing something wrong. Shopping at Whole Foods, buying new clothes, frequently getting coffee or lunch from a cafe, etc.? You’re doing it wrong.


Can I get all my big spenders down here to the dance floor, please? If you’ve got cable and/or a landline, you’re doing it wrong. If you aren’t cleaning your own house or car, you’re doing it wrong. If you’ve got a pickup truck ’cause every once-and-a-while you have to ‘haul stuff,’ you’re doing it wrong. (U-Haul, baby. U-Haul.) If you own an item whose sole function is to broadcast to the world that you could afford to buy it, you’re doing it so, so horribly wrong.


Investment returns mean nothing if you’re spending all of your money! Doubling $1,000 is still better than quadrupling $499. Sock away that money religiously and financial freedom will be a reality more quickly than you’d expect.




Lest we bore you to death in this section, here’s the moral of the story: invest your money, don’t just put it in a savings account. The difference is worth hundreds of thousands (often millions) of dollars to you. Not convinced? Don’t know how to start investing? That’s what this website is for! Click on Wonder at the top of the page we’ll get you there.


Make more.


If you can leverage your skills for more money from your employer or somebody else’s, or pick up a side hustle, give it a shot! That is, of course, once you’ve optimized your spending and want to save even more aggressively.


And at what point will I be free?


We feel strongly about giving credit where it is due: Mr. Money Mustache has worked out the math so that you can find out how long it will take you to ‘retire’ at any given savings rate. Even better, use this simple (and exhilarating) tool to see for yourself!


For instance, if you invest 15% of your take-home pay, you’ll be able to retire in 43 years. If you invest 50% of your paycheck, you can ditch your desk in 17 years. If you invest a solid 70% of your income, get ready to be financially free in 8.5 years.


early retirement mustachian wonder learn invest retire in 23 years


Let’s break that down.


Where do these numbers come from? They follow the 4% rule, a.k.a the safe withdrawal rate. It goes like this:


  • Your annual investment returns will be 7% – 8% over the long-term (>10 years). That’s because you invest in a broadly diversified portfolio of low-cost index funds.


  • Inflation will be 3% per year. It’s the historical long-term average.


  • Your leftover gains will be 4% per year, which you will withdraw for living expenses.


  • You could actually ignore the first two bullet points and just work under the assumption that you make 4%- 5% returns after inflation.


Believe it or not, these simple, back-of-the-envelope calculations are considered by some to be conservative. Annualized stock market returns are often calculated as 9-10% per year over the past century, and, though historical rates of inflation hover around 3% per year, the Fed currently marks it at 2% per year and for several years it’s been barely above 0%. The 4% rule is widely referenced as a responsible rate of withdrawal.


Meanwhile, your present financial situation can be expressed by income – expenses = savings. Let’s say you earn $100 per year. You save $25 and spend $75. This means your expenses are $75 per year and you wish to maintain this level of spending in your early retirement. (Research actually shows that as you age, you spend less, but, you know, too much math.)


In order to continue your lifestyle but follow the 4% rule, $75 must be equal to 4% of your nest egg. Simply multiply $75 by 25 to receive your answer of needing a nest egg of $1,875. When that nest egg grows by 7%, you’ll withdraw 4%, which will equal $75. Upon withdrawing that money for the year, your nest egg will be worth 3% more in nominal terms and the same amount in real terms.


So, to know how much you’ll need before passive income will cover your expenses, multiply your annual spending by 25. Remember, 7%/year returns aren’t guaranteed or automatic; the number is simply a long-term average. In some years, you’ll be diminishing your portfolio by withdrawing 4%. In others, your portfolio will grow in real terms despite your withdrawal.


A final, more realistic hypothetical


Let’s say you can live on $30,000/year and you earn $60,000/year. You save $30,000/year for 17 years and build a nest egg worth just under $1 million. You’ll be able to safely withdraw $30,000 (actually a bit more) each year without diminishing the value of your account.


Please, try your best to take this article optimistically. We’re walking you through a strategy that will free you from the job that leaves you, if you’re like 67% of the population, unsatisfied. Financial independence is a goal that involves the ability to spend more time with your loved ones, or outdoors, or pursuing whatever you value and are passionate about. So don’t get caught up in the frugality issue.


To pre-empt your scepticism about spending less money than you do now, think about the fact that someone who works full-time (40 hours/week) making minimum wage ($7.25/hour) will earn $15,000 per year, assuming she doesn’t take a single week off and doesn’t pay income tax, FICA, or anything else that diminishes her paycheck in any way. This is already an optimistic situation, and it isn’t hypothetical. People like this get by because they must be frugal to survive.


If they live on $15k per year, you could do the same. That means if you make $30k/year, you could potentially save half of your income and be financially free in 17 years. If you make $60k per year, not only could you retire in 17 years, you could be liberated in less than 9 years, by living as if you only earn $15k/year. Don’t know how to optimize your spending? Read our blog. Or check out any of the dozens of other wonderful sites that explain how you can eat well and travel the world while spending relatively little.



About 1,500 words into this article, we think it’s probably time to stop writing and let you digest.




  • Early retirement doesn’t mean never working again or spending your remaining days on a beach with a margarita perpetually balanced on the armrest of your folding chair. More aptly called financial independence, it entails never needing a job for its paycheck, having the freedom to pursue your passion(s), and attaining the ability actualize your values.


  • Save 15% of your paycheck, you can retire in 43 years. Save 50% of your paycheck, you’ll be good to go in 17 years. Save 70% of your paycheck and get ready to quit your job and embrace financial freedom in less than 9 years.


  • Increasing the amount you save, as a percentage of your income, will always be more important than getting a high return on an investment. High returns are great for diligent savers; they mean nothing for those who are still slaves to consumerism. Spend less. Invest your savings. Make more, if you can, and commit to your plan.


What do you think? Let us know in the comments!

If you enjoyed this post, consider following our weekly article!

backblaze cloud backup storage

Leave a Reply

Your email address will not be published. Required fields are marked *