Early Retirement in Three Easy Steps

Any book on personal finance will tell you that there are three steps to early (or regular) retirement.

Step 1: Determine how much you need to retire

Step 2: Get money

Step 3: Retire!

Step 1 takes a few hours to a few months, if you have no idea what you’re spending and need to track it. Step 3 takes two seconds: “I quit!”*

Step 2, on the other hand, takes approximately ten years to forever. That’s the stage I’m in. If you have a good grip on your finances but aren’t yet rich enough to stop working, that’s the stage you’re in. And I’m guessing most of us who are in the midst of step 2 could use a few more specifics on getting to step 3.

The three steps above bear an uncomfortable resemblance to the business plan of South Park's underpants gnomes. The starting point and the goal are clear, but the middle is a bit of a muddle.

In the last few months, I've been frustrated by the lack of information on step 2. Advice on personal finance seems to fall into two categories:

• Most popular personal finance books, blogs, and magazines cover step 1. They help you get out of debt, cut your spending to a reasonable level, and take some steps to prepare for the future, like opening an IRA. They may include a basic discussion of stocks or real estate. They usually encourage you build wealth towards the eventual goal of financial independence, but their specific advice ends with getting you to put 15% into a tax-deferred saving plan. The target reader is a young adult or an older adult who’s just starting to get his or her finances in order.

• Step 3 resources include most books on early retirement as well as higher-end financial news sources like The Wall Street Journal and Forbes. They assume that you’ve already made a fairly significant amount of money. They focus on teaching you how to best invest that money, or try to help you decide whether you already have enough money to retire. The target reader is middle-aged or older with a very well-paying job and significant assets. These resources can teach you a lot about investing, but the specific advice may be hard to execute if you’re not already very close to your retirement goal.

With about half of American adults saying they plan to retire before age 60, I think there’s a need for a lot more explanation of step 2.

I want Working for Rachel to be the step 2 site: a site about building wealth through frugality, investing, and entrepreneurship; about working towards goals that are important to you even when the journey gets hard; about making progress and facing setbacks. I hope to keep this site going in one form or another until I reach financial independence.

My goal is to help readers figure out how they can achieve financial independence or the freedom to do what they want with their time by sharing what I’m doing, talking about what’s worked for other people, and offering relevant tips and information.

This is just a baby blog so far, but I'm trying to improve it every day. If you've been reading for a while, thanks for joining me so far. If you're visiting for the first time, please stick around and I'll try to make it worth your while.

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* There are a lot of complications involved in planning for that statement and dealing with it once you've done it, but those two seconds alone can make you “retired.”