Rethinking retirement

The FIRE (financial independence, retire early) movement has really taken off in the US and is now also gaining traction here in South Africa. 

People of all ages and wealth levels are focusing more on their finances, with the goal of early retirement. 

This is something I dreamed of as a young teenager. 

Having done the maths, it seemed an easy goal to achieve and I have been interested in the idea ever since – for obvious reasons. 

There are basically two drivers to the FIRE idea. 

The first is the concept of retiring early, which isn’t, strictly speaking, true. 

Sure, retiring at 40 (or even younger) seems like a grand idea – but then what? 

My plan had always been to stop working when I hit 40 and join the senior surfing tour. (Turns out you have to qualify for the tour, it’s not just a bunch of oldies having fun – so that dream got dashed.) 

But when I hit 40 and quit my corporate job, it took just a week for me to start wondering what I was actually going to do with my time.

In other words, the concept of retiring early is not about retiring; it’s about the freedom to do the work you want to do. 

It may not pay as well, but it will be fulfilling. 

Some examples: I’ve been chatting to somebody who always wanted to work with distressed animals, so she now spends her free time volunteering at animal shelters. 

Another took a half-day job so that he could spend afternoons with his children when they got home from school. 

This brings me to the second part of the FIRE equation: financial independence. 

We tend to assume that financial independence is all about the best returns, lowest fees and overall fastest growth for our investments. 

But, actually, this isn’t the case – except for lower fees, which are always important.

The truth with financial independence is that it’s about your spending, not your earning or investment growth. 

Living cheaply has the single biggest impact on your ability to save and is totally within your control, whereas as what you earn is largely outside your control. 

So, a more modest car, smaller house or apartment and local rather than international holidays are what’s going to give you financial independence.

In other words: Spending less, saving more and needing less to live on.If you start to live on, say, half of what you’re currently living on, two things happen. 

Firstly, you’ll save a heck of a lot more, accelerating your ‘retirement’ date. 

But, secondly, you’ll actually need less money for your ‘retirement’ because you will have lower living expenses. 

By living on less the financial independence part of the equation becomes a whole lot easier. 

If your retirement is no longer about working and earning to afford retirement, but rather earning less because you need less to live on, then it all starts to come together.

Almost two years ago I drastically scaled down my living standards, dropping my home expenses by some 85%. 

Now every month I have a large pile of cash I can save and, if I took total retirement tomorrow, I would have more than enough money as my expenses are so much lower.

So yes, returns and the like are important, but what really matters is what you spend, and you need to work on that. 

It’s not always easy, but it is always possible to live a simpler, cheaper life. 

No matter what you live on every month, somebody out there is living on half that amount and so can you. 

This article originally appeared in the 7 March edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.