Frugality Magazine - Frugal Living Tips for Financial Freedom

How To Reach Financial Independence On Minimum Wage: My Plan To Escape The Rat Race

Have you ever felt just a tiny bit jealous of people that have taken early retirement?

I know I have…

The world is awash with people earning crazy sums of money and then congratulating themselves for saving loads of money. But what happens when you're *not* earning much money? You can still gain financial independence - and here's exactly how I plan to do it. If you want to retire early, save money and live a life free of financial worries then click here to learn more...Imagine the feeling of never having to work again (unless you want to).

Imagine not having to worry about bills.

Imagine never having to get up while it’s still dark.

Imagine all the quality time you could spend with your family and friends.

And how wonderful it would be to fill your day with “passion projects” rather than the drudgery of everyday work.

Just imagine!

I think we can agree that life would be rather different to what it is now!

But of course we know from Jacob at Early Retirement Extreme and Mr Money Mustache that you don’t need to be retirement age to retire. And you certainly don’t need to be a multimillionaire to do it earlier.

The wonderful thing is that with some hard work, dedication, frugal living and some epic budgeting anyone has the potential to retire early – as in decades earlier than the average population believe is possible without a lottery win.

The Surprising Math Of Financial Independence

I’m no financial whizzkid but the dudes that are throw around two basic formulas for calculating how much money you need in savings/investments to actually retire completely.

They are:

300 times your monthly expenses

or

25 times your annual expenses

And while this might sound like huge numbers for those living expensive, consumer lifestyles, for those of us willing to be rather more frugal these numbers are surprisingly reasonable.

You’ll have to excuse my “cute old British ways” but I live perfectly comfortably on less than £1,500 a month. If I was budgeting hard, I could reduce this to £1,000 without too much sweat.

Taking that £1,000 as a base figure, that would mean I’d need £300,000 (just over $500,000 at current exchange rates) to retire on at the low end of the scale. £450,000 ($750,000) in investments would be comfortable.

While that’s still a fair old chunk of cash, it’s nowhere near the “millions” most people assume you’d need to quit the rat race early.

My Plan To Escape The Rat Race

When I first started in the work place, I earned only a tiny bit more than minimum wage. It was a depressing situation – and it’s a rut that some people remain in their whole lives.

But I wanted more. So I worked hard and by winning promotions and payraises, as well as making several jumps from one company to another, I’ve managed to raise my income from minimum wage to above the national average.

Not “minted” in any way – many people I know earn far more than me. But I’ve more than doubled my salary in the last ten years. And this increased income has also brought increased opportunities.

Over the last 4 years or so I’ve scrimped and saved and have succeeding in paying off all my consumer debt. With a frugal lifestyle leading to very low monthly overheads, I’m now in a position to start saving roughly 40% of my income each month.

That’s a lot higher than the average Brit (and something I could never have done all those years ago when I first started working) but according to this chart, it still means that I’ll have to follow this plan for 22 years in order to achieve financial independence.

Better than never, but I want to do a lot sooner than that.

So my plan is to keep saving, but rather than simply putting my money into passive investments, to actively invest in a franchise. I have some ideas in mind for what I want though I’ll reveal more as the time approaches.

But in essence I’m going to leverage as many of the skills I’ve picked up in the workplace as possible in order to become a business owner and (I hope) reap the financial rewards that come from that.

Becoming a business owner will, I hope, double my income or more, allowing me to save 80% of my money. Which, going back to the original chart, should mean being financially independent roughly 5 years after starting the business.

Now there are a lot of variables here. When will I have saved enough to invest in a business? How much will the business make? Will I be able to keep my living expenses down? Will I have the discipline to save so much of my income?

All of these variables could speed up or slow down my progress. Or derail it altogether.

But at least I have a plan of action now. Something to focus on. A reason to save. And a potentially bright future.

And that’s how I plan to go from minimum wage and serious debt to financial independence – hopefully by the age of 40.

Are you aiming for early retirement? What is your master plan? Please share your thoughts in the comments below…

Want to achieve financial freedom, retire early and stop worrying about money? Yep, me too. Here's my plan to escape the rat race and lead the good life. #frugality #money

Richard

Sun-worshipper and obsessive frugality blogger. For loads more money-saving advice come and join us on Facebook.

10 comments

  • Exactly! What’s important is to have a plan. The only way to know whether it will work is to implement it.

  • Hi Richard,

    I dig your goals.

    We’ve been saving, and traveling, over much of the past 3 years. I feel living in many of the tropical paradises that we do, we save even more money because the cost of living is so low.

    I went from being a broke security guard to professional, island-hopping blogger because I both boosted my income through blogging but also avoided living in the pricey NYC-NJ area.

    Paying 2 bucks for a lunch – for 2 – in Chiang Mai, Thailand for 6 months or renting a large, new, clean apartment in the same city for $400 per month….no that’s not a typo….has helped us retire to become pro bloggers, and world travelers.

    We’re paid US/Western rates for the services we offer but benefit from an awesome exchange rate, in places like Thailand, Bali, or here in Fiji.

    Traveling, building up our savings accounts, and having a pension and 2 other retirement accounts has really helped us pad our savings while enjoying the fruits of our labor all over the world.

    Thanks Richard. All the best with your financial goals.

    Tweeting this through Triberr.

    Ryan

    • Ryan – sounds like you’ve attained a pretty awesome lifestyle! Congrats! And thanks for the share. I’ll have to pop over and read your blog for some more juicy details 🙂

  • Yes, I am jealous of people who retire early! At the moment I am concentrating on paying off my debt but your calculations are very interesting. I have never really thought about trying to work out what I would need to be able to retire. I hope things work out, I will be watching and reading in interest.

    • Good luck Victoria; it’s well worth all the effort 🙂

  • I’m completely down with this line of thinking. I do hope to one day take everything I’ve learned in business and apply it to my own ventures. Through my own observation there really is no better path to wealth than owning your own businesses.

    • Thanks for the comment man! It’s really frustrating at the moment because I feel like I’m spinning my wheels a bit. I put so much effort into getting rid of the debt, and the business idea fills me with excitement. However right now I’m stuck between the two just saving up the money for the business and it seems to be going so slowly 😉

  • Hey Richard.

    Sounds like you have a very doable action oriented plan and I like the idea of one eventually owning a business.

    I am 53 but have been retired since the age of 32. In fact, and trying to be humble, your opening into to this post could have been an entry in any one of my daily journal meanderings.

    I make about 12,000.00 a year – Canadian – and I live very well. Mind you I also live simple and thus, have many of my needs already taken care of. It’s not a lifestyle for everyone, but it suits me just fine 🙂

    I wish you all the best on your journey and look forward to following your story over time.

    Take care and all the best.

    Lyle

    • Lyle – thanks so much for stopping by – and what a wonderful story you have! I definitely envy you! I would be perfectly happy for a “simple life” myself with time to enjoy my many different passions. Great blog by the way! 🙂

  • […] their tail trying to keep up with debt repayments and the “standard expenses” of everyday life. Financial freedom is a lot further away for these people. The thought of having hundreds of dollars each month to put […]