As my articles about Early Retirement sparked unexpected response from readers, I am being repeatedly asked the same question: “How Much Money Do I Need to Retire Early?” People seem inspired which I am happy to hear. You should be the only ruler of your own time. The more people do what they enjoy doing, instead of what they have to do in order to keep up with debt repayment for material things they were tricked by advertisements to purchase, the happier the society and the world as a whole will become. I will get to answering the “How Much Money Do I Need to Retire Early” question shortly, but first let me remind you that some of what seems as the most pressing question may not be the right question to ask.
Many people think that it was easy for me to quit work and start traveling, because I had lots of money in my bank account. This could not be further from the truth. The jobs I had never paid much, but what’s worse, I was financially destroyed when Walmart made me shut down the business I was running. I borrowed a lot of money in order to start the photography business and when Walmart opened next to me, the business stopped generating any form of revenue so I wasn’t able to keep up with monthly payments to my creditor. I abandoned the business which was supposed to be making money to pay off the loan I took to start the business. The thing is – even though I shut the business down, I still had the debt I took to start it. The business was gone – yes, but debt stayed with me.
It was making no sense to stick around given that the business was not generating any revenue and trying to fight against Walmart with my limited resources would not have yielded any results. I have simply picked up some of business’ merchandise and left to look for a job. I took a break from paying off my debt, which grew exponentially due to compounded interest but a few months later I resumed the payments. At the time of my spiritual awakening, when I was leaving my job to retire early and travel the world, I was still almost $30,000 in debt. So to answer your question directly: “How Much Money Do I Need to Retire Early?” I don’t know about you, but when I retired early, I had a grand total of $2,000 in my bank account and $30,000 plus interest in debt. That means that the amount of money I had when I retired early was negative $28,000 if I leave out the interest.
Bold you say? Perhaps, but I cared less. Instead of how much money I needed in order to retire early, do you know what I was concerning myself about? What to do to stop wasting any more time – my most precious commodity before I run out of it. I wanted to stop spending my days doing what I had to do in order to keep up with debt payments (aka enslaving myself by spending the best days of my life going to work) and start doing what I wanted to do. Yes, I admit I jumped straight down the well without any ropes to keep me from hitting the ground hard, but this is what risk-taking is all about. If I didn’t jump, I wouldn’t be writing this post from Cambodia after Apsara dancing session. I’d still be back home in cold Edmonton doing the same thing I have been doing for the past 7 years – alarm rings in the morning, I put on my clothes and walk out to catch a bus to work where I spend 8 hours being pushed around before catching a bus back home where I wouldn’t get until it’s already dark outside. This is not what my idea of the best day of my life looked like but while I continue going to work, the clock ticks away. I would have just spent one more day of the limited number of days I have to live on this Earth.
Now let me get to the point and address the speculation I have raised at the beginning of this article. Why would I connect “How Much Money Do I Need to Retire Early” question with the premise of asking the wrong questions? To be blunt – it’s because “How Much Money Do I Need to Retire Early” IS the wrong question. It implies that you may need certain amount in your bank account before you can consider early retirement and that makes it the wrong question. Don’t worry about how much money you need or whether you have enough at this moment in time. Early Retirement is just a convenient term that I occasionally use to refer to life after quitting work, but it’s not the goal. The goal is to have enjoyable and abundant life. You don’t have to call it Early Retirement. As a matter of fact, you don’t have to retire at all? It is up to you to decide what your idea of time well spent is. I will continue using the “Early Retirement” term because of sheer convenience, but the real meaning of the term should be understood in broader sense than implied. It is the way of life where you as a person spend your days engaging in activities that bring excitement to your life. It’s about you doing things that make you happy, things that make you feel like you are living a fulfilling life.
When asking the “How Much Money Do I Need to Retire Early” question, think about financial independence, rather than financial riches. That’s what makes this question irrelevant. Financial freedom is not about how much money you have in your bank account, it’s about having sufficient cashflow to sustain the lifestyle you desire. What good is a million dollars in your bank account, if you are a grumpy old man who has seemingly achieved success in his life, drives a nice car and lives in a posh house, but you are miserable whole day because the business you have worked so hard to built into this successful enterprise drains you mentally and stresses you out. The bank account is full, you can afford anything your heart desires, yet you are still grumpy and look like crap as you drive around in your brand new Lexus convertible. This is not an exciting, fulfilling life. Regardless of how many zeroes there are on your bank account statement, if you are laying down to sleep at the end of the day, and you are not excited to tell your partner about how amazing a day it was and what new adventures you have experienced today, you are not living the type of life you want. You are merely living to do what you must do to satisfy your business’ needs. You are a slave of your own enterprise.
Whether you have a lot of money, or just barely making it from month to month, or even if you are like me – up to your nose in debt – if you want to retire early, quit asking yourself how much money you need. All you need is a healthy cashflow. As for me personally, I quit working and started travelling when I had a cashflow of $300 net a month. Overtime I was able to increase it to $1,000 a month and it’s enough to give me the type of lifestyle I desire. I put a few hours a week towards retention of the income and it keeps my cashflow going, securing my financial freedom, allowing me to have the best day of my life every day. It’s not about how much money you need to retire early, it’s about how much cashflow will secure you with the lifestyle you desire. Start asking the right questions (in general, this statement is not related to asking me questions). It’s the most essential part of getting the right answer.