Early Retirement: Why You should Focus on Expenses

. 3 min read

In the pursuit of financial independence it may be obvious to work hard and make as much money as you can, however as I'll make a case for in this post, that's not your best course of action.

Retire Sooner

With a frugal mentality you'll retire earlier. Earlier even, than someone with a harder work ethic. This is because of the two-fold effect of reducing expenses, making it more important than increasing income.

  1. If you spend less you can save more...

More capital gives you more options for different investments, not only can you invest larger sums but you can invest in alternative options with better returns. Turning financial independence into a sprint, not a marathon (but don't get burnt out!).

  1. If you spend less you can save less...

This is an interesting one. If your goal is to live under 4% of your net worth then making that 4% as small as possible means that the 100% also gets to be small! Immediately knocking off time spent in the proverbial cubicle. Essentially, when you focus on expenses...

your goal number is smaller and you get there faster!

What about relative expenses?

"Always pay yourself 10%, right?"

Not necessarily.

Percentage savings rate is a great stat to have. You can use it to easily compare yourself to others, in a reasonably objective way. However as an individual it is important to understand the false confidence it can give you. Sure if your family and another are at a 40% savings rate, technically you're "even" (and better than the vast majority of the population) but if your household income is double theirs than from another perspective to be "even" would be to have a 70% savings rate![1]

(Please save more than 10% either way)

Of course it's not all or nothing. Everyone has there "right spot" between spending now or later. After all, point two is almost a oxymoron "save hard so you don't need to". Find what makes you happy.

Avoid lifestyle inflation

My biggest challenge - and what I think is probably the hardest part of early retirement - is living below your means or as some would argue simply living within your means.

When finally taking the plunge into the big bad world of... employment. Many of us get a doubling or even tripling of our income. But a few other things change; ramen and peanut butter become lunches with coworkers and the fixie bike you used to get around campus becomes a car. These expenses creep up on you, and before you know it you're worse off than when you started. By focusing on expenses you can evade this problem. You learn ways to stay frugal, track your finances and so on. Or bear the pain of knowing how much faster you could be getting to your goal.

Lifestyle inflation is the strange phenomena describing how, with an increasing income, people also feel the need to have an increasing spending rate. Hopefully this will help you identify it in your life and nip it in the bud before it becomes too much to deal with.

Abundance mentality

On the pursuit of freedom you may find yourself in command of a large sum of liquid cash. But sometimes freedom is self-control. Ask yourself: What has changed in the moment you read that bank statement/report? Nothing, your needs, hopes and goals are still the same. Having money in not a reason to spend money.

Fear of missing out

Should you spend while you're young? Join your friends and colleagues for expensive pastimes? These are tough financial lines to walk and as time goes on, with lifestyle inflation as the norm, the social pressure makes them almost impossible. How can you keep up? I say dont't. Make friends who understand your goals or find a middle ground.


As we get older we become responsible for things (parenthood, senior roles etc.) and our previous financial decisions add up. Mortgages, bad investments, car payments. Things that parents were relied upon for (moving costs, phone bills...) become our own to worry about. The important thing to distinguish here is life vs lifestyle. The cost of caring for a family member - old or young - is life. But the cost of multiple cars is certainly not. A lot of these responsibilities are choices and it's up to you to decide if they are worth the extra years of work.


As you earn more there is a tendency to "treat yourself" with a holiday or a new phone etc. After all, you have been working hard. This just boils down to ones ability to defer gratification. Keep that ultimate reward in mind - just imagine! Work becoming optional!

Lifestyle inflation is probably the biggest obstacle for prospective FIREers

  1. House A income 50,000 House B income 25,000 if both save 40%...
    House A expenses 30,000 House B expenses 15,000
    If A were to focus on expenses like B House A would be able to save 35,000 which is a 70% savings rate. ↩︎

Graeme Russell

I created this blog as a way to reach people about topics I care about: ethics, self-improvement, and lifestyle. I hope you can find something of value here.