Early Retirement – The ratio of spending to security

thanksJustin put me onto Mr Money Mustache’s blog (“MMM”). MMM makes a point that if you have a balance sheet that equals 25x your annual spending then you should be set for life.

What prevents us from getting to the magic ratio?

At my best, I see debt and spending as where to focus.

When I’m feeling sorry for myself, I might blame taxes, lack of income or the cruelty of fate.

Like Mr. MM, I retired early. In fact, I’ve had three retirements – two voluntary and one via the insolvency of my de facto employer.

When I was living first class in my late 20s, I realized that I could slash my spending by 90% and take a year long vacation. This change didn’t get me to the magical 25x ratio but it got me close. I worked part-time (as a coach) and knew that I could tighten my spending and get myself to 40x covered.

Somewhere around 2002, I got caught up in the bull market that ran through to 2008. My spending rose, and rose, and rose, and rose. I didn’t mind as I was making good money. If you’re in a high-paying profession then you’re prone to this risk. I’m not unique. Docs, dentists, lawyers and finance professions often extend their careers by 10-25 years by cranking expenditure and borrowing.

My life came to a head in 2008 when the economy went off a cliff, my income dropped 95% and I had grown accustomed to my spending.

Boy did it hurt to stop spending money.

It hurt because I didn’t see the link between spending and the anxiety that filled my life.

Inside my head, the battle raged…


What I was really saying is, “it hurts so much to change. I just want to be happy, please leave me alone.”

I see plenty of conflict in relationships over money. Historically, much of my irritation over clutter stems from an underlying financial anxiety that I’m not addressing via my own habits.

Quite often the main breadwinner delegates the financial planning function, putting their spouse on an allowance and creating a external target for internal angst.

A couple years ago, I realized that I’d done this to my wife. I had to own my fears, change my spending and redirect our family.


I had the courage to take my first retirement at 31 because I remembered the freedom that came from living like a student.

I forgot that lesson, increased my net worth by 500%, and felt completely insecure at 40.

Every $10,000 of expenditure requires $250,000 of assets to buy me financial peace of mind.

What’s the true cost of your spending?

What could you achieve if you removed unnecessary anxiety from your life?


I have buddies that are planning to work an extra decade – to build assets sufficient to support a spending rate that doesn’t bring happiness and strains their home life. They tell me stories of their children begging them to work less.

The pain is real.

So are the benefits from incremental change.