Being frugal is a good habit to adopt if you want to build more wealth. However, it is very hard to frugal your way to early retirement. Instead, it’s much better to try and earn more income since the upside is limitless.
Surprisingly, I didn’t receive much pushback from my post,APP亚博娱乐 .
Almost everyone got the gist, which was to help you question whether the pursuit of early retirement is counterproductive if you have to live like a pauper. Instead, perhaps finding a job you actually enjoy doing would be a better use of your time.
Yes, a couple of readers jabbed at me using the words “coastal elite” as a pejorative term to say how out of touch I am that 200% of FPL is a near poverty wage. But come on, this isn’t politics. It wasn’t I who set the rules. If you find the FPL levels insulting, call your power-hungry Congressman or woman!
The government says that if you earn up to 400% of FPL, then you are considered poor enough to get healthcare subsidies versus paying extra to subsidize others. In general, it’s better to give than to receive. If we all become takers then our country is screwed.
I also acknowledge in the post that earning 300% to 400% of FPL seems totally fine in non-coastal cities.
Hard To Frugal Your Way To Early Retirement
The “do-ability” of retiring at 200% of the poverty level is not so bad if you live in a poor area. Not all of us are coastal elites. Consider that $25,000 a year goes a long way when rent is $650 a month.
Here’s my monthly budget:
Obviously, healthcare would go up upon retirement, but miscellaneous and gas costs would go down. This budget is $1,250 a month of spending. If you earned $25,000 a year, that would net to about $22,500 which gives you $1,875 a month.
这是525美元fun money, which is pretty sweet. I mean, you can go to dinner at Applebees for like $25, go bowling for $5 an hour, etc. There’d be money for vacations too.
First of all, I commend Joe for living so frugally and appreciating his lifestyle. So many of us seem to not acknowledge how truly great we have it in America. Even with a 200% of FPL income, you will still live much better than millions of others across the world.
乔reminds me of my situation when I first got a job in NYC. I shared a studio with a friend for two years before moving on to share a two bedroom, one bathroom apartment with two others.
For more details, see:经济自由住房支出指南
从一开始,过着简朴的生活,帮我保存and invest aggressively for the rest of my life. Once you get your costs down, your wealth really begins to compound through consistent investing.
There are just several problems with Joe’s budget that needs to be addressed.
Frugal Budget Early Retirement Disconnect
It’s easy to slum it when you’re 23. By the time you’re 50, you’re going to find it harder to continue sleeping on a cold cement slab. I swear, Applebees will start tasting disgusting after your 1,000th visit.
2) Thinking you’ll only have yourself to take care of.
When you’re 23 and single, it’s easy to think your budget won’t change because you’re only responsible for yourself. It’s also easy to feel invincible. But as we know, there are plenty of people in their 20s who can’t even take care of themselves because他们的父母还在.
Life is not static, no matter how hard it is for you to see the future.
This is the biggest disconnect of them all. People who live super frugally today, mostly because they have a modest income, think they can retire early because of their frugal budget. Let’s review the早退过着贫穷或接近贫穷的生活chart again.
Now let’s say you’re Joe, who happily makes $25,000 a year in gross income and lives with two roommates in a poor area. He gets to spend $525 monthly on fun activities. However, what if Joe had no fun and instead invested 100% of his fun money in order to retire early. How long will it take for Joe to amass the needed $485,600 – $1,214,000 to retire?
Using a 4% withdrawal rate and a 7% compound return on his $6,300/year in savings, it would take Joe30年没有乐趣提前退休. For only then will he have enough to spend $525/month on himself.
The Better Early Retirement Strategy
The key is to make as much money as possible while also keeping expenses as fixed as possible. So long as your earnings are growing faster than the rate of your spending, you’re winning. And so long as you diligently invest more of your savings every month in a risk-appropriate manner, you’re really going to win out in the long-run.
I really want to encourage readers to培养富足的心态. Don’t settle for living on the minimum. The desire to frugal your way to early retirement is a scarcity mindset.
Instead, strive to earn more so you can not only retire early but also have the活下去的选择权.
Know that the amount of money you can make out there is endless. There’s only so much cost you can cut. Instead of retiring early on a meager portfolio, find a job you enjoy. Keep on working until your portfolio can generate at least 300% of FPL in passive income.
Recommendation To Build Wealth
保持在你的资产净值的顶端个人资本, the web’s #1 free financial app. Track your cash flow, x-ray your investment portfolio for excessive fees and inappropriate risk exposure, and use their retirement calculator to plan for the future. There’s no rewind button in life. Make the most of everything, especially things that are helpful and free.
读者们，你们还观察到了关于Financial Independence Retire Early movement? 你有没有试着节俭地提前退休？为什么不去无限的上升呢？