How to Retire Early at 50

Who wouldn’t love to know how to retire early at 50?   Well, this is exactly what my wife and I managed to do – retire early by age 50.  

I’d like to tell you that we knew exactly what we were doing and had a solid plan from the start.  But that was simply not the case. 

We built up our ‘wealth knowledge’ over time and made a huge number of mistakes along the way.

But we obviously did some things right.  After all, how many people can retire early while still having two kids under age 10?

Looking back now I can see clearly what worked and what didn’t.  And it is both surprising and simple!

That is what I wanted to share with you.  I want to share the pieces of the ‘wealth puzzle’ that helped us build a solid asset base, big enough to fund our early retirement.

I also want to expose some of the chaos, as that helped shape our thinking.  But more importantly share the simple steps we can now see worked.

I truly believe that nothing has changed in decades regarding wealth creation.  Some of the investment vehicles available may differ, but the principles have stayed the same.

If you would like to know more about the type of investments we used then check my blog post – How to Invest For Early Retirement. And if you want to know more about the FIRE movement (Financially Independent Retire Early), then check this post out.

I also plan to expand some of the ideas covered here.  So if there is something you would like to know more about then leave a comment below.

Ok, so let’s get started…

But First an Important Disclaimer

Let’s make this simple.  Nothing I say here is meant to be financial advice of any description.  Whatever worked for me, may not work for someone else.  

I am simply sharing my experience and what I’ve learned on my own journey.  Any links or information I refer to are provided as information only and should not be taken as professional advice.

What I hope to do is share an experience of how I personally managed to achieve something very few people can do.  You should always do your own research when making financial decisions and if you require, seek out professional advice.

How To Retire Early – 30 Seconds Summary

If I was to summarise all the things we did “right” along the journey it would be something like this;  

• Reduce your spending – know where your money is going and “stop the leakage”.
• Increase your income if possible – ask for a raise/promotion, get a side-hustle.
• Use this to increase the ‘gap’ between your income (cash in), and your expenses (cash out).
• Use this positive ‘gap’ as your investment cash, to invest in simple long-term investments that provide solid returns (typically 6-10% pa on average).
• Have faith in the process, stick to the strategy and DO NOT be distracted by promises of ‘getting rich quick’.

That’s it!  Nothing more sophisticated or difficult than that.  The point is to not get lost in all the detail.  

From Nothing to Financial Freedom: Our Journey

I know what most people are thinking at this point – “I bet you had money to start with!”.  So let me give a little background to put things in perspective.   

I want to make one thing clear from the start – my wife and I started with absolutely nothing.  We didn’t have wealthy parents or a generous trust fund to kick start everything.

I was raised by a single mum for much of my childhood.  By the way, one of the fastest ways to destroy wealth in a family is to get divorced!  Halve all your assets and double your living expenses – terrible way to achieve financial freedom!  

Through my teenage years I watched my Mum manage to support me and my sister, on slightly less than minimum wage.  I still don’t know how she did it – except that she ran a super tight budget.  

My wife’s parents migrated to Australia when she was 9.  They started a restaurant and on the opening night had only $28 dollars left in the bank.  If no one came in that night, they were in deep trouble!

What this did for both of us was instil a strong work ethic.  There is nothing that hard work and a bit of ingenuity can’t fix. 

The one thing my wife and I both did was focus on getting our university degrees.  No ‘gap year’, no taking time to ‘find ourselves’.  Just hard work, and a strong intention to get ahead early. 

Now, some 30 years later, we are both retired.  My wife decided to stop work around 10 years before me, to have kids.  So we still achieved financial freedom with only one income for a significant portion of time.

Now I get to do whatever I want each day, including this….I share my thoughts and experience with anyone who wants to listen.  My hope is that I can help others achieve their goals of financial freedom – so they in turn get to do whatever they want every day.

Now that is true freedom!  That’s living your ideal Lifestyle.

You can find more about me and my background here.

Mindset, Mindset, Mindset!

Ok, so let’s get started and dive into some detail. 

Please don’t overlook any of these steps, thinking they don’t really matter.  These are the things that made the biggest difference to our wealth and financial freedom.

First and foremost – everything begins and ends with mindset.  I simply cannot stress this enough.  And unfortunately, it’s not just your mindset, but includes those people closest to you.

Becoming “wealthy”, and building an asset base to be financially free, is all about two things;

1. Mindset – you absolutely must have the right level of thinking!  As James Allen says, “we become what we think about all day”.   Your thinking, and how you view the world around you, will dictate your financial position.
2. Daily Habits – it’s the little things that we do everyday that makes the biggest difference.  I like to say – time will come and go, so it’s the little things we do today that make the most difference for the future.

Just remember this, over 70% of lottery winners end up broke.  They had the money but not the mindset to hold onto it!

If you want to start working on your mindset now, I strongly recommend reading the following;

• The Richest Man in Babylon, George Classon
• Think and Grow Rich, Napoleon Hill
• Millionaire Next Door, Thomas Stanley & William Danko

And if you really want to make a difference, listen to this recording from Earl Nightingale, every day for 30 days,

The Strangest Secret By Earl Nightingale

• The Strangest Secret, Earl Nightingale (Spotify)

These old classics are absolutely timeless.  Like I keep saying, the rules for wealth creation haven’t changed.  They are all around us if we stop and look!

Build A “Savings Credit”

The first part to building your wealth is having money to invest!

For most people they always have too much month at the end of the money.  This is one of the reasons we end up with bad debt.  Don’t have enough money left?  Just put it on the credit card and make it your future self’s problem.

We need to reverse that!  At the end of the month, once all the bills and expenses are covered, you need to have money left over to invest. 

My wife and I discovered we needed to build a positive “gap”, or credit, between our income and our expenses.  The bigger the gap, or savings credit, the more we could invest. 

After a while it became an ongoing ‘fun’ challenge to find ways to ‘increase the gap’.   Make a game of it, ask your family ‘how can we increase the gap?’. How can we increase the savings credit we have at the end of every month?

With a bit of focus and effort it’s amazing how much ‘savings credit’ you can create and how quickly your investments can begin to grow. 

So how do you create and increase that savings fund?  Well, I’m glad you asked….

Where Does the Money Go?

It never fails to amaze me how many people have no idea where the money goes each month!  Most people think they do, but really they don’t.  

And if you don’t have a handle on where you are spending your money how can you possibly know where to start saving?

As a mentor of mine said to me – “Steve, you must stop the leakage”.  

He believed that too many people have way too much leakage in their money.  They have all these little things that cost money each week or month, that all adds up.

It’s like having a bucket with holes in it.  You keep adding water each month, but the water keeps leaking out.

If you haven’t done this, I strongly suggest that you sit down and record everything you spend your money on for a month.  Categorise your spending into something like;

• Must haves – like pantry food (not dining out).
• Household bills you can’t avoid – power, rent, mortgage etc.
• Health – exercise, gym etc.
• Entertainment – everything you do to fill your ‘free time’.
• Luxuries – Like gifts, personal items etc.
• And of course, how much you actually save.

Then simply put a percentage against each one.  Have a look at the luxury and entertainment items and see what’s there.  You may find things like Netflix, CableTV (Foxtel in Australia), Spotify etc, etc.

Then have a look at all the ‘gizmos’ and ‘gadgets’ you have in your house.  How many iPhones, iPads, TV’s, PlayStations, Bluetooth speakers etc… I think you can see where I am going with this!

Now I’m not going to tell you to turn all these off.   But I do want you to realise how much money goes into all these non-necessities.  They have somehow crept into our lives like a ‘must have’, when they are just entertainment or a luxury.  

The crazy thing is that even when we get a raise at work (more money coming into the bucket), we go and buy more stuff we don’t need (adding more holes to the bucket)!

The point is, there are a huge amount of things that cost a lot of money that you don’t really need.  That is the leakage in your finances – and that is where your wealth creation can start (or not – it is up to you after all). 

Budget, Budget, Budget

Now we have some idea where the money is going, I’d strongly suggest keeping a budget.  Oh, I can hear the groans now! 

But seriously, this is another of those ‘wealth habits’ that will make a huge difference.  

Even to this day our family has a budget – and we religiously track it!  It is the only way to make certain that everything is on plan and there are no surprises.  

We use a simple app on our phones to record transactions as we make them.  I then download this once a quarter into a spreadsheet.  I can quickly see where we are spending our money and if we are on budget.

This makes it easy to see where you can ‘increase the savings credit’.  If you want to put more into your investment strategy, then you can see which expense you can cut back on. 

If you work on your budget, you can see where you can continue to ‘eek’ out a little bit more savings.  It’s amazing how much you can cut out of your budget to increase that savings, with a little extra effort.

Once you have retired like we have, you will want to keep track of your expenses, so you don’t run out of money.  The habit of keeping and running a budget will continue to work for you and allow you to maintain the lifestyle you want.

How to Build Your Wealth

When we were still in our 20’s, we invested in a simple Wealth Education program, and it was the best thing we did.   The teacher who owned and ran the program was a ‘doctor’, which was funny as he had his PhD in Arts – in Pottery!

But even knowing this there was something in our gut that said we should pay our money and attend the course.  Remember lessons in life often come from random and strange places.

The process our teacher outlaid was simple, straightforward and easy to follow.  And it is largely what we have followed to accumulate our wealth.  

It could be broken down into the simple steps of;

• Stop the leakage and save at least 20% of your income.
• Invest in good Property.
• Invest in Blue-chip Shares.
• Invest for the long term.

That’s it!

Save as much as you can from your income, invest that into solid investments like property and stocks, and let time take care of the rest.

The funny thing is that so many people tell us not to do this!  “This is the ‘old’ way of getting rich”, they say.  But here’s the thing – it bloody works!

Yes, it takes time and yes you need to compromise on spending to increase the amount that you can save.  But it works!

Which Investment to Choose – Keep it Simple

As I said above, this is not meant as investment advice.   I am not going to suggest any particular investment vehicle, stocks or property, to invest in.  All I can do is let you know what we did. 

You should do your own research and seek out your own financial advice, tailored to your circumstances. 

The one thing I want to stress is to keep it simple.  It was always the simpler approach that worked for us.  When we added complexity, we always came unstuck.

If you want to know more about the type of investments we used then check my new post – How to Invest for Early Retirement.

Two Levers of Wealth Creation

There are only two levers in the wealth creation equation.

1. Time, and
2. Amount Invested.

The more you can add to either of these two ‘levers’, the faster you will hit your wealth goals.  

The earlier you start your investment journey the more you have time on your side.  Compound interest, reinvesting the growth in your investment portfolio, has an amazing effect over time.

One of the biggest factors with this strategy is time.  As the saying goes, it’s time in the market, not trying to time the market.   The earlier you start, the better the results and the earlier you can achieve your financial goals.

Let’s say you invest in something that gives you a return of 7% pa.  Doesn’t sound like much, 7%.  But over 10 years your original investment will have doubled in value! 

That’s it.  Take an amount of money and invest it at 7% pa and double your money in 10 years.   We’ve already said that the stock market growth averages to 7% plus conservatively.  So it is more than possible.

Imagine what would happen if you continued to add to your investment every year.  Every year this new amount invested will continue to compound as well. 

The more you can commit to invest the more the growth is accelerated.  So if time is a little against you, because you are starting your wealth journey a little later, you need to pull the “more money” lever.

Given it’s impossible to gain more time, the only way to make up for it is to invest more.   You will need to work harder on increasing that savings gap.

Creating Additional Income

If you have reviewed and trimmed your expenses all you can, then your focus needs to be on increasing your income.

One way to do this is to consider a second job.  Or better yet, a ‘side hustle’.

A word of caution – don’t let the side-hustle take over your life!   You can quickly get sucked into the world of Making Money Online (for example), that promises a perfect lifestyle while you can get rich quick.

Remember what the side-hustle is meant to be doing.  It’s meant to supplement your main income to accelerate your wealth creation. Not distract you and fall behind on your goals.

What I do hope is that you find something that you really enjoy.  It could become something that you continue once you ‘retire’.  In fact, it could supplement your income and allow you to reach your retirement goals much earlier.

How We Retired Early – Summary

Phew, we’ve covered a lot sharing our journey to early retirement before we were 50.  I hope you have picked up on some ideas that make a real difference.

Here are the key points to remember;

• Stop the leakage in your spending.
• Increase the gap between your income and your expenses.
• Invest in either good property or ‘blue chip’ stocks.
• Keep faith in the strategy and focus on the long term.
• Allow time to work its magic.
• Consider additional income to achieve your goals earlier.

That’s it in a nutshell.  To do this you need to develop some important habits, such as;

• Work consistently on your mindset.
• Create and follow a budget.
• Track where the money goes.

For us, this simple but effective process allowed us to retire early before 50.  It has given us an amazing lifestyle, where we get to choose how we spend each day.

When money, or the lack of it, is no longer a problem, only then can you really understand how you want to live your life.

Please let me know your thoughts below, or if there is something you would like to know more about.

Until next time,

Cheers