Do I Need to Be a Millionaire to Retire Early?

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Most people dream about winning the lottery. Why? Because they want to stop working, buy a new house, travel the world, focus on their hobbies, and spend quality time with their family. However, very few people realise that they could do all of these things without being a multi-millionaire!

In fact, leaving it to chance, and waiting for a big lottery win, makes it improbable that it will ever happen. The Savings and The Income sections aim to show you how this type of lifestyle change is possible – Without winning millions and without compromising on comfort, convenience and quality of life.

Monkeyism can help everyone reach financial independence and early retirement, irrespective of income. All you need to do is use financial common sense: live within your means, avoid wasteful spending, and make intelligent investments.

Everyone Can Be A Millionaire

The ‘millionaire lifestyle’ is a social myth created to keep us striving for a very specific and unachievable (and perhaps undesirable) notion of success. The notion is steeped in consumerism (the engine of our market economy) and equates money with achievement and happiness.

Riches become an indication of success and money can buy you happiness. Except often neither of these is true. Yet, our society continues to perpetuate this myth with the idea of the ‘lifestyle of the rich’. Being a millionaire becomes the ultimate goal. And now even those that would be deemed financially secure by most have started to complain about their ‘modest’ means. Ridiculous, no?

The median household income in Australia (and in most developed countries) is around $67,000 per year. This amounts to about $5,583 of income per month. Most people – following the advice on this blog – should be able to save around 50% of this pre-tax income. And if you do that, you will be a millionaire!

How? Well, all you have to do is put the money into a savings account. $2,500 each month at 5% interest per annum will make you a millionaire after 20 years. The more you save, the sooner you will be a millionaire!

Thus, if you can increase your income (or earn above average), can cut your expenses even further, or can find a higher savings rate (check the highest-paying savings accounts in Australia), you can have your first million much more quickly.

However, even the symbolic ‘million dollar’ milestone doesn’t guarantee financial independence. Rags to riches can become riches to rags if you don’t spend your money wisely. In some social segments, people are now even starting to think that one million isn’t enough but that you need several million to live comfortably.

So, just when ‘the dream’ becomes achievable, the goalpost moves. And the worst part is that we do this ourselves. WE move the goalpost to facilitate a certain standard of living that we’ve either become accustomed to or expect to be able to support. The question you have to ask yourself is what you really need.

At present, our total family spending is approximately $10,000 per year for all expenses excluding housing. We reduced our food spendings to $3,000 per person, without making any sacrifices. If we had one million dollars, we could buy a house for $200,000 and still have enough to live off for the next 80 years! (Assuming a savings rate which offsets the inflation rate).

For the curious and unconvinced, I will detail later how we can spend so little and still maintain a high quality of life. Again, it comes down to the financial decisions you make.

Lifestyle Inflation

Although it is relatively easy to amass one million dollars, most households fail to achieve that milestone. The reason for this is simple: Lifestyle inflation.

That means we have a tendency to inflate our lifestyle in line with our income. If we have a lot of money, we have the urge to spend it. Thus, depending on how much money people have, their reference points change. Not just social reference points but also financial reference points.

For example, a student might be a happy with a secondhand ‘beater’ car, but wants to trade up to something new once s/he graduates. And so we swap one commodity for another – Moving up from our middle-of-the-range Japanese car to a prestigious German car. Brand new, top of the line.

Similarly, we want bigger, nicer homes, with more rooms, in better neighbourhoods. That means we grow our dreams, but we tend to also grow our expenditure and, unfortunately, our debt. So, what used to satisfy us when we were in a lower-income bracket, no longer does the trick as we move out of that bracket.

Why? Because we have been told that we should reward ourselves, that we deserve it. Plus, all of our friends are doing it, right?

I know people who tell me ‘a million is no longer enough to retire on’. That’s because they’ve bought into the ‘dream’ of owning a mansion, having expensive dinners, traveling first class, wearing designer clothing, attending hot events, having cleaners and housekeepers, maintaining swimming pools, having multiple guest rooms, etc.

In other words, people adapt their lifestyle to match their income. Or enact what they perceive their lifestyle should be. The irony is that these people tend to never become millionaires. They are too frivolous. It’s the other people, people like you and me, that work hard and save hard, that can achieve financial independence – With or without a million dollars in the bank.

The Monkeyism Mindset

Monkeyism isn’t about becoming a millionaire. It is about helping you understand how much money you need to live free from work, and to help you plan towards that goal. In other words, we want to help you understand how much you need, how much you spend, and how you can amass assets to cover your expenses indefinitely (or at least until the end of your time).

If you do become a millionaire, it changes nothing. It doesn’t matter. That is what Monkeyism is here to tell you. Forget the magic number, focus on the actual numbers. Do your maths. Being enchanted by social status and imagery can derail your plan. So be careful not to fall into social traps.

Think about yourself. Think about your life. Think about what you need to be happy. Don’t let marketing campaigns and social pressure throw you off.

We are lucky enough to live in societies where we have more than we could wish for – Excellent healthcare, education, food and shelter. You need to appreciate this. Everything beyond that is smoke and mirrors. There will always be an elusive dream object that you cannot afford. It just gets more expensive if you have more money! It’s not real.

What is real are our relationships. No money in the world can improve them. Monkeyism helps you appreciate what you have and lets you be satisfied with your current lifestyle, knowing when you have enough rather than urging you to want more. If you think this way, you will soon be able to provide for yourself without having to work. Isn’t that wonderful?

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Monkey Master

My wife and I are currently living in Sydney, Australia. We plan on becoming financially self-sufficient in 2015 so we can retire at 35. We are regular working people, trying to be smart about saving money and generating passive income. I want to share with you how we reached that decision and how we are planning towards financial independence. Continue Reading.

4 thoughts on “Do I Need to Be a Millionaire to Retire Early?

  • 1 May, 2013 at 11:21 pm

    You state that the median household income in Australia is $55K, but you link to a plot that shows household income per capita. These are not the same thing, me thinks.

    • 2 May, 2013 at 12:08 am

      Yes you are correct. I should be more careful with my wikipedia links… I have made the correction to point to the full wikipedia page rather than just the graph. At the moment, they display the household income per capita plot as an illustration for the median household income article… In any case, they also link directly to the Australia Bureau of Statistics website for reference. Thanks for pointing that out!

  • 15 June, 2013 at 5:49 am

    Oh dear, that article about the lady who can’t seem to manage to live on £80,000 annually. Poor her… (Lovely how she is dating and having dinner with a rich-ish guy and the two of them spend £120 on one meal but then neither of them wants to pay the bill because everything is so expensive these days).


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