Massive Changes to Retire Early

Ok, I live a fairly good middle class existence.  Granted I’m a bit lower of the bill than most people, but overall I still have a nice house, a flat screen TV, car and some nice clothes.  Generally I blend in fairly damn good with the neighbours other than I really don’t care to spend money on things they care about more than I do.

Yet if you are desperate to retire as early as possible you have to accept the fact to achieve a very low spending rate some of the core elements of a middle class life likely need to go out the window.  Here are a few potentially huge cost  saving ideas.

  1. Housing.  Let’s face it this is you biggest expense, so being careful here can save tons of cash.  Consider either sharing living space with someone (ie: share an apartment/condo or rent out the basement of your house) or buying a very small house to begin with or do both.  Housing prices are fundamentally tied to the amount of square feet you owe so buy as small as you can handle and save the expense and the mortgage interest, not to mention property taxes.  Hell you might even want to consider a trailer. Potential savings: $250 to $1000/month.
  2. Transportation.  Cars are bottomless pits of money, so if you can get by without one you could be saving a large amount of cash flow.  Also consider having a bike for the nice weather and public transit for the not so nice weather.  You might also want to look at car sharing.  Potential savings: $100 to 400/month.
  3. Food.  Meat is good tasting, but expensive to base a diet on.  Even if you cut you meat eating in half that is a fair amount of savings.  Also consider stop buying as much pre-fabricated food as possible and dropping your cheese consumption to a minimum.  Think eating more vegetarian than anything else.  Potential savings: $100 to 500/month.
  4. Booze.  Skip this entirely or reduce it to a few times a year or perhaps limit yourself to brewing your own.  Another idea is to never buy booze when you are out for dinner.  Potential savings $50 to 100/month.
  5. Hobbies/Entertainment.  You hobbies should ideally have a zero cost/almost no cost or better yet turn a profit.  Your entertainment ideal would cost you almost nothing like having people over for supper or borrowing a movie from the library.  Eating out would be a rare treat.  Potential savings: $200 to $400/month.

So if you add them all up you can reduce your monthly spending anywhere from $700 to $2400 which would represent a retirement saving reduction of approximately $210,000 to $720,000 (using the 4% rule).  So yes, being different and not living the standard life does care some serious benefits when it comes to early retirement planning.

Now you just have to figure out which if any of these changes you would like to make to your own life.  I suggest if you are going to do any of them try living in a smaller house.  It’s a bigger cost savings and has the nice benefit of you can’t buy as much stuff to fill the house with.  So your savings even are higher than what I put in for a range.

If you have another idea please share with a comment.  Also note I just guessed on the range of savings based on previous experience with other people’s spending habits.

6 thoughts on “Massive Changes to Retire Early”

  1. I think your savings estimates are pretty accurate. In order to reach extreme early retirement I’m living in shared housing, and am carless (quite happily – love my bike). Luckily, I’m also a vegetarian non-drinker and my favourite hobbies cost very little. Using the public library fully is my favourite money-saving tip. Also, “living behind the curve” generally (i.e. not needing the latest, fastest anything) and not falling prey to a keeping up lifestyle helps. Thanks for the great post!

  2. Absolutely love the site, check in everyday. Would also like to retire at 45 – 50 at the latest.

    Basically my wife and I have chosen to live WAY below our means. We gross about $120,000 per year… not an outrageous income by any stretch. But when you consider that we live in an 850 sq ft condo, have no car payments (we have a paid for toyota pickup and I drive a company vehicle with a gas card), very likely to be permanent DINKS. We bought our condo in 2002 for $150,000 and now it is worth $300,000. Tons of equity built up there. We know we can afford a much larger, nicer home, but we have convinced ourselves that we don’t really NEED it. As it is we bank about $4000 a month, and once our mortgage is paid off (we owe about $80,000) we should be able to bank over $5000 a month. When you see your bank balance grow at this rate, early retirement is easily within reach.

  3. Julie,

    You will be retired in no time with a lifestyle like that.


    Way to go. $4000/month in savings!!! But at your current savings rate I’m almost amazed you haven’t paid off the mortgage more.

    Best of luck,

  4. Tim, one of my strategies has been to only buy houses that are fixer-uppers and make money on the sale of them.
    I have the simple philosophy of living on 1/2 my net pay every month, however I allocate that is up to my discretion once the important things are taken care of like mortgage and utilities.

    I do want to live in a small house one day though. Less to clean too!

  5. I realize that you read Early Retirement Extreme, but if people are really interested in retiring early, I’d suggest following Jacob’s plan as he outlines – it follows the same plan outlined here by Tim, just goes much further and outlines how to retire in 5 years or less.

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