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Early retirement strategy on one income : Can we still retire early with our income cut in half?

We have a dream of retiring early.  What is early, you ask? Age 40.

Early retirement to us means financial independence. We don’t want to just stop working altogether and “retire” in the traditional sense. We want to have the freedom to work because we want to instead of needing to.

We didn’t start saving seriously until we were in our late 20s. Better late than never right. I had a plan, I had it all worked out. I was 28, 12 years should be enough to plan a scheme for financial freedom.

In a nutshell

We want to retire by 40. The goal just got more challenging with me quitting my job, thus cutting our household income in half. Our road map to financial independence involves us traversing 4 different terrains – making more money, saving more money, changing our lifestyle and overcoming our psychological barriers.

The plan was simple – start earning more, start reducing the expenses and save the rest.

Technically the plan was solid, except, I overestimated my patience. By far. I couldn’t handle another 10 years of working a corporate job. I wanted to quit. I wanted to quit right away. And I did.

So what happened to our early retirement plan? Nothing. We still want to retire by 40.

With our income cut in half, is it still possible for us to achieve this dream? We are 31 now, so we still have a good 9 years.

Cut the income in half AND not compromise on things that are important to us AND retire with a decent nest egg at 40? If I didn’t know me, I would ask what I was smoking? That is impossible.

Well, I am determined to make it possible.

I decided to write a detailed proposal, a road map, plotting our course to financial independence.

Early retirement plan

What is our ultimate goal?

Our ultimate goal is to create a non-profit organization that will serve mentally challenged kids. We are saving for that right now, but to completely give ourselves to the service of these wonderful kids, we have to stop thinking about ourselves. Which brings us to – financial independence. We want to stop thinking about going to work just so we can pay the bills. We want to stop thinking about how we are going to put food on the table if we donate our entire paycheck to charity. We want to stop penny pinching on things that give us the most pleasure and satisfaction in life. We want to be financially free!

Why do we want an early retirement?

I touched upon this already in my “why”. Early retirement gives me the freedom to pursue life as we see fit instead of conforming to a model that just feeds my consumerism. There are other reasons as well,

  • We are not happy with our life as it is now. We have everything to be happy, but we feel we take more from this world than we give.
  • We want to make a difference.
  • We want to do more things than to have more things.
  • Because we want to die wealthy : We want to leave a legacy. We don’t want to have money just for our existence but we want to set up a foundation and enough seed money in that foundation for others to add on and use solely for charitable purposes. It might be counter intuitive to retire early if we want to accumulate more money. As I mentioned earlier in this post, we don’t want to stop working completely when we retire, we want to stop working to fund our survival.
  • Finally, I am really blessed. I am blessed with a loving husband, wonderful parents and sister, great education and more than enough material pleasure. I want to be a blessing in other’s lives.

When do we want to be financially independent?

By 40 or in terms of an exact date – Dec 31, 2021. If we can achieve my goal earlier, awesome, but we definitely want to get there by 40 at the latest.

How to get there, esp. given that we have cut our income in half?

We have done both good and bad things with our finances in the past. Starting now, we want to have mostly good things. The execution of my plan involves 5 steps – figuring out how much money we need to be financially independent, making more money, saving more money, changing our lifestyle and overcoming some mental barriers we have built for ourselves.

Make more money

We plan to generate more income via several different streams including

  • Sell stuff on Craigslist/Amazon/eBay
  • Freelance/Self employment
  • Invest in riskier and investments with higher returns
  • Acquire rental properties
  • Buy dividend stocks to generate cash flow

Save more money

We want to curb our expenses before we work hard on increasing my income. Why? Won’t it be easier to budget if we have more money to work with? Yes, but I believe optimizing our lifestyle will do even more wonders with increased income, otherwise we will just increase our spending as our income grows.

  • Extreme frugality is not for us. We want to enjoy life AND save money. We want the best value for our money.
  • Cut ruthlessly on things that are not important to us. For things that matter to us, look for ways to cut the cost but still get the same pleasure.
  • Continue to save for retirement with concentration on cash flow rather than a lump sum.

Make lifestyle changes

This involves more than reducing our spending. We want to reduce waste and increase our life efficiency.

  • Learn/update our skills. This will help us do a lot of things ourselves which we would have outsourced otherwise. House maintenance/renovation, taking care of our cars, learn to cook more cuisines
  • Plan for health care expenses. I want our retirement health care expenses to be less than what they are now. We can’t account for everything that can go wrong, but one thing we can do is get fitter physically.

Identify our psychological barriers and work on it

Just 3 years ago we were living paycheck to paycheck, so it is not an easy feat for us to even think that we can achieve all this without depriving ourselves of the things that are important to us. We have to work out every situation and every mental objection to convince ourselves.

  • Go against the traditional consumption based model we have built around us.

Translating this all into timelines and milestones brings us –

Year # Age Year Milestone
1 32 2013
  • Buy our first home
  • Reduce our expenses by 25%
  • Make at least 25% of my last salary from business
2 33 2014
  • Make at least 50% of my last salary from business
3 34 2015
  • Make at least 75% of my last salary from business
4 35 2016
  • Replace 100% of my last salary from business
5 36 2017
  • Pay off the house
6 37 2018
  • Buy a rental property
7 38 2019
  • Invest enough in Peer to Peer lending to generate $500-$750/month income
8 39 2020
  • Invest enough in dividend stocks and CDs to generate $500/month income
9 40 2021
  • Generate enough passive income to cover our living expenses

I am going to rely on you, my readers to keep me accountable. I will update you on our progress and different approaches to reducing our expenses/increasing our income. I already share most of this information, the only addition will be case studies on how much we saved with each move we make.


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