Put your hand up if you dislike:

• Your alarm clock
• Rush hour traffic
• Fictitious deadlines
• Office politics
• People who forget to go on mute during conference calls
• How slowly the clock ticks towards 5 o’clock on a Friday afternoon
• Randy from accounting
• Stacks and stacks of TPS reports

If you’re waving your fingers and toes in the air now, you might find this lesson rather interesting.

Retirement may seem like a hazy dot far off on the horizon, or simply an impossibility. However, with some careful planning and laser-like focus on the goal, you can get there. Things that are not required (although they sure help): A six-figure salary; a whopping inheritance; a lucky lottery ticket.

In this lesson we’ll take a look at a couple of inspiring stories of people who managed to leave behind the rat race at stunningly early ages. We’ll also discuss how you can shape up a plan to do the same.

Off The Beaten Track

If you haven’t heard of Mr. Money Mustache (MMM), I am pleased to introduce you. MMM and his wife earned normal salaries, managed to save the vast majority of their paychecks through frugal living, invested wisely in index funds, and here’s the good part — they retired at the ripe old age of 30.

The MMM family can now be found stomping around Longmont, Colorado with their son in tow. They’ve left the working world for good.

If you’re ready to fall down the early retirement rabbit hole, read through:

• Getting rich: from zero to hero in one blog post
• The shockingly simple math behind early retirement
• The 4% rule: the easy answer to “how much do I need for retirement?”

If you’re tempted to ditch this course for an hour or two of binge reading, I won’t blame you. I’ll wait right here…

When I first stumbled onto MMM’s website, I simply couldn’t stop reading. Article after article challenged the conventional wisdom that I thought was true:

• Get a good job — stick with it for decades — if you play your cards right, when you’re 65 you’ll be able to put your feet up and call it quits
• You need millions of dollars in the bank to retire
• A purposeful life is gained one promotion and corporate accolade at a time

If you want to work until you’re 65, climb up to the highest rung of the corporate ladder, save up your millions, these are perfectly valid choices. These choices aren’t better or worse than others.

But, the fact is that these ARE choices.

This was the light bulb moment for me: you don’t have to follow the standard life path if you don’t want to. There are other ways to live your life. You can gain freedom before you go gray.

Not to be outdone, another incredible story comes from Justin at the blog Root of Good. He and his wife live in Raleigh, North Carolina with their three children. Justin retired at the age of 33. For a blow-by-blow account of how they made it happen (filled with great tips and nitty gritty detail), check out:

• Early retirement at 33: an overview
• Zero to millionaire in ten years

How Much Money Do You Need to Retire?

While you’re still many years away from retirement, there’s no use in modelling out a fine-tuned plan for how much money you need. Too many variables will change in the future for this to be a worthwhile exercise.

Pick a “north star” that you can work towards. I recommend you set your initial “retirement number” at an investment portfolio that is worth your expected annual expenses in retirement, multiplied by 25 to 30.

There are two parts to this simple equation:

• Your expected annual expenses in retirement, which should be based on your current spending habits, with adjustments made for lifestyle changes that you expect to have in retirement (More travelling? Kids will have moved out of the house?)
• A multiplier of 25 to 30. The higher the multiplier number you choose, the less chance you’ll have of running out of money in retirement, but the more money you’ll need to save up to meet your goal. Note that this corresponds to a “withdrawal rate” of 4% to 3.33%

For example, if you expect your expenses to be $50,000 per year in retirement, your target retirement goal should be to save up an investment portfolio worth $1.25M (25 times) to $1.5M (30 times).

To make your initial planning super simple, use this retirement date forecasting spreadsheet. After you input your assumptions, it’ll tell you how much money you need, when you’ll get there, and will show you a few what-if scenarios as well.

Go with this simple estimate for now. As you get closer to your goal, you can start to tweak the numbers. You’ll have a better idea of what your expenses in retirement actually will be. You’ll also know the amount of any pensions or social security payments that you’ll receive.

Conclusion

There’s nothing wrong with wanting to follow the standard path of retiring at 65. But, if that’s not for you, know that there are other ways of designing your life. Retiring in your 30s, 40s, or 50s is achievable with the right mix of planning, dedication, and patience.

To get there:

• Set your sights on a retirement number — start with a simple estimate based on your expected annual expenses in retirement multiplied by 25 to 30
• Keep chugging along with the same skills that you’ve been building throughout this course: tracking your spending, spending less than you earn, and investing the difference wisely
• Tweak your plan as you go along. Sit down at the end of the year to assess where your net worth is, adjust your retirement number as needed, and get back at it

When you’re through, let’s meet up. Bring your favourite printer.

You’ve flipped the switch on your financial auto-pilot; you see a steady stream of money building up each month; you’re probably itching for the next step. Now what? In this lesson, we’ll discuss setting financial goals.

Having clear goals in mind will keep you accountable to your plan and will help you to figure out how much (and why) you need to save.

What Are You Saving For?

By setting financial goals, you can turn your savings & investment account balances away from just being abstract numbers on a screen into something much more tangible. Each of your dollars will have a purpose:

• Paying down student loans / credit card debt
• Savings for the big trip you’ve always wanted to take
• Home down payment fund
• College savings for your children’s education
• Retirement nest egg

Spend some thinking about what your personal financial goals are. Think immediate (this month), short term (1-12 months), medium term (1-5 years), and long term (5+ years).

Totally fine if your goals are vague rough outlines at this stage. The point is to give yourself something to work towards.

There are worse things in life than saving up a few thousand bucks for one purpose and then changing your mind once you get there.

What If I Don’t Know What My Goals Are?

What if you still find it difficult to sketch out long term plans and goals? Perhaps you’re comfortable with your life now, but have too many uncertainties on the horizon — will I move to a new city? Do I want to have kids down the road? Will I eventually buy a home?

If the view is too hazy to lock down on concrete goals at the moment, I’d suggest setting your sights on attaining “financial independence” — also known as “F-you” money.

A financially independent person is someone who can choose to:

• Refuse to tip-toe around others at work — you can speak up when you feel strongly about something, say “no” to your boss, generally walk a little taller in your shoes
• Ask for reduced working hours or a fully remote job (if that floats your boat)
• Work at a job that aligns strongly with your values, even if this means taking a big pay cut
• Take time off work to re-charge; travel; pursue a passion; make music; play video games; whatever!

To put it more bluntly: once you’ve got enough money you can say “F-you” when, where, and to whom you want. Having more money makes you less dependent on others. More money = more freedom.

The bottom line: Spend some time thinking about why you are saving your money. Set your sights on the goal and make it happen.