Minimalism and Financial Independence: How You Can Reach Retirement 20 Years Sooner

I’ve spent a lot of time recently thinking about the phenomenon of lifestyle creep.

Even if you don’t know what lifestyle creep is, I can almost guarantee you’ve experienced it to some degree. It’s that sneaky thing that happens when you start to make more money and – suddenly – you begin to spend more, too. It’s the sensation responsible for the fact that, despite making 10%, 20%, maybe even 30% more than you did when you began working, you still may only be saving the same amount as (or less than) when you started.

I heard a fascinating explanation for why we do this:

When our lives consist of commuting to work, sitting in a cubicle for 9 hours a day, paying bills, and feeling stressed, we need something (anything!) tangible to prove to ourselves that life isn’t just work and paying bills. Essentially, we’re trying to buy relief from the “normal” lifestyle.

So what’s the problem? Maybe the better question is, why is this “normal,” and why do we accept it as such?

The vicious cycle begins when we suddenly need to keep working in order to support the lifestyles we’ve created.

I’ve found that people tend to make much better decisions when they understand what their options are, so I intend to lay them out clearly here.

Where minimalism enters the scene

Minimalism is a philosophy that says we can live better lives with less stuff – in fact, that the stuff is what’s making us actively unhappy. That’s an oversimplification, sure, but there’s enough research out there to prove, without much doubt, that the feeling of wanting creates dissatisfaction.

I think we’re going about it all wrong – rather than working our entire lives to buy ourselves shiny trinkets along the way to distract ourselves from the fact that we aren’t fulfilled, wouldn’t it be more efficient to (a) decondition our obsession with buying new stuff and (b) save efficiently so we can stop working a few decades earlier and spend our time pursuing purpose instead?

Because here’s the kicker: The stuff isn’t making us happy anyway! The current “normal” approach we have (in the U.S., anyway) isn’t really working, is it? We’ve never had a collective higher standard of living or more money to spend, and yet our happiness has been steadily trending downward (if you’re interested in this research, watch Minimalism on Netflix). Why? Because advertisers (whose sole incentive is to sell us more shit) run the companies that run us.

I can’t even type this without sneering at how idealistic it sounds, so to diffuse the fairy dust vibe, I’m going to turn to my favorite tool: math.

Variable lifestyle expenses and how we can spend intentionally to fuel joy instead of compulsory consumption

My take on minimalism is this: Money can buy happiness, to some degree, if you know how to spend it.

When I first started consulting with personal finance clients, I had a super laissez-faire approach to people’s spending habits. I didn’t want to touch it with a ten-foot stick, because I knew that, at best, people wouldn’t listen, and at its worst, it would be offensive and judgmental – so I’d avoid making suggestions, for the most part, even when it was clear someone wasn’t happy or fulfilled by the way they were spending.

But here’s the thing: We, generally speaking, don’t know how to spend our money in a way that makes us happy! That’s why so many of us become frustrated and dissatisfied with our lives and finances.

If we use money to feel secure, experience new things, and share our wealth with others, money will buy happiness.

I consider myself a reformed materialist because I truly used to feel like I was on a hamster wheel. When I was at Alabama, girls had Range Rovers and Cartier bracelets and Louis Vuitton bags and David Yurman rings and – AND – I couldn’t keep up. The birthday and Christmas present strategy I attempted to employ with my parents to acquire designer things twice a year simply didn’t cut it, and I felt constantly behind and inadequate. The sorority system at Alabama was simply composed of a slice of wealth that I didn’t really belong in, and I felt it.

Shortly after I moved to Dallas and was removed from the petri dish of upper class flash (and working in an office setting with normal, middle class people), I noticed the pressure dissipated. When I wasn’t surrounded by $2,000 accessories every day, it stopped feeling like something I needed to fit in.

But my first few months in Dallas were a detox period that still cost me: Even when I was making the least amount of money I’ve ever made professionally, I’m pretty confident I was spending more than I’m spending now, and by a large margin.

When I sat down and calculated how much I was spending on variable discretionary categories, I was clocking in around $700 on Bars & Restaurants and about $400 per month on Shopping. $350 on “personal care,” which at the time was how I justified eyelash extensions and manicures.

Essentially, I had approx. $1,500 going down the drain monthly – and I wasn’t happy.

And you know what? There’s something incredibly liberating about deciding that’s just not who you are. That’s they key: It’s the identity shift. It’s making these types of statements to yourself:

“I’m not the type of person who spends hundreds of dollars a month on clothes and shoes that I’ll wear once and then stuff in the back of my closet.”

“I’m not the type of person who spends money to impress people.”

What would you do if you could retire early and do whatever you wanted?

Would you read a bunch of books? Learn new languages? Start your own company? Teach fitness?

If your lifestyle isn’t fueled by consumption, you can probably get your monthly expenses to a pretty reasonable spot. Let’s say you need $3,000 per month to live comfortably (just you, not your partner). For reference, my budget accounts for spending about $2,700 per month, and I live in Dallas.

In order to withdraw $3,000 from an investment account every month and have the interest (at an average of 7% returns, which is a standard estimate) replenish what you’re using, you’d need $900,000.

If you’re using $3,000 per month total, there’s probably not room for $1,500 per month in bullshit. Let’s circle back to my personal example, where I (essentially) transitioned over time from wasting $1,500 every month on stuff that wasn’t fulfilling to investing it instead.

After 20 years of investing $1,500 per month (with a 7% return), I’d have $761,000. To hit $900,000, you’d have to do it for 22 years.

I’ll be 47 years old in 22 years.

Now let’s say that, instead of investing that $1,500, I continue spending it on compulsory consumption. That means my expenses every month would be $4,500 (my original $3,000 in fixed expenses, plus the $1,500 in bullshit). In fact, let’s even crank this more conservatively – maybe your expenses are just increasing from $3,000 to $4,000.

Now, instead of $900,000 in an investment account that you’d need to support yourself using only your investments, you need $1.2 million (to withdraw $4,000 per month and have the interest replenish your spending).

Not only that, but you’re investing far less – let’s say you’re still able to invest $500 per month.

It will take you 40 years to hit $1.2M if you’re investing $500 per month.

A zillion records should be scratching in your head right now

Holy shit!

Do you understand what this means?

These are your two options, using our example’s income/spending figures:

• Spend $4,000 per month and invest $500 per month

  • Retire in 40 years with $1.2M and continue using $4,000 per month in early, financially independent retirement

• Spend $3,000 per month and invest $1,500 per month

  • Retire in 22 years with $900,000 and continue using $3,000 per month in early, financially independent retirement

Of course, this math exists in a tax vacuum – but I hope it illustrates the staggering amount of time you can reclaim.

In my mind, minimalism is the philosophy that enables this lifestyle joyfully

I am happier now than I was when I was spending $1,000+ per month on random stuff. I feel more joy, I appreciate my belongings more, and I spend my time far more intentionally.

But it’s a practice. I’m excited to see how my strategy evolves over time, but I can say with complete confidence that the single-most impactful thing I’ve done to change my financial life over the last few years has been cutting ties – continuously and mercilessly – with the materialistic expectations that used to absolutely rule my perspective on a day to day basis.