Game-changing secret to early retirement without major 'regret'

Ben Nash has broken down how to get financial independence without having to cut back so much that you won't enjoy life. (Getty/Supplied)

The idea of creating financial independence when you’re young and retiring decades early has some serious appeal. This is why the FIRE (financial independence, retire early) movement has gained so much traction in recent years.

But it’s not all it’s cracked up to be. When you get this wrong, it can mean decades of your life wasted and serious regrets.

The principles of FIRE are rock solid; invest early and often, build a passive income, and stay on top of your money - but their practical application can be difficult.

Specifically, the fact that most advocates of FIRE suggest that to maximise your savings you need to be ruthlessly frugal.

This means cutting your spending down to bare bones, and sometimes so far that, in my opinion, you waste years not really enjoying your life.

That all being said, I believe the outcome of financial independence is worth working for.

But instead of traditional FIRE, I believe you should aim to get there in a way that doesn’t require you to completely sacrifice your lifestyle.

This is possible, but only when you take the right approach.

Prioritise spending that’s truly important to you

Spending less is a powerful and immediate way to increase your savings, and for most people, it’s possible to cut down spending to increase your savings rate.

That being said, my opinion is that if there is spending that’s truly important to you and the lifestyle you want to live, you should build your money and investing (or FIRE) plan around this.

It’s easy and common to find yourself in a position where you’re spending money on things you aren’t really getting much value or enjoyment from.

I think it's this spending that should be cut first to boost your regular savings.

You can then prioritise any spending that’s truly important to you, it means being closer to the lifestyle you really want to live.

And to say it another way, if you cut out spending that is truly important to you just so you can save more, it’s likely to lead to regrets in the future.

This may mean saving and investing at a slightly lower rate, but in my opinion the lifestyle and happiness benefits that come from this make it worthwhile.

How to increase my income to boost savings

Most people that get deep into FIRE are so focused on cutting spending to increase savings, they end up missing out on a huge opportunity to save more - increasing your income.

There is a clear limit to how much you can cut your spending, but there is no limit to how much you can increase your income.

The good news is that today it’s never been easier than ever before to get a boost to your income.

The rise of technology has made it easier to pick up flexible work, whether it’s doing gig work for a ride share platform, online shopping deliveries, or picking up odd jobs on a freelance website or Airtasker, there are so many options to generate more income.

On top of this, you can often negotiate a pay rise or extra hours or work with your current employer.

Today we’re in a historically low unemployment environment, and there’s a talent war in full force which means many employers will be open to the conversation about what you can do to boost your pay packet. Failing that you can change jobs which typically comes with a significant pay bump.

And the final way to increase your income is to develop your career, upskill or reskill to move into a different role or even a different industry. This path will typically take a little longer but can lead to a much larger increase in your income over time.

The good news is that this extra income can go straight to your bottom line and help you save more without just sacrificing more.

Plan aggressively

The common approach to FIRE planning is to do a simple budget to establish your savings rate, then start investing money and continue following this path until you’ve built up a significant amount of assets.

This approach lacks clarity around exactly where you’re going to be financially at any point in time, and ultimately this means it’s hard to find the ideal balance between enjoying your lifestyle today while you make sure you’re making the progress you want for the future.

Instead, when you take the time to plan robustly, you change the game.

A good plan will allow you to map out your position today, your savings rate, and what you’re doing to build your investments.

From there you’ll be able to forecast exactly where you’ll be financially in a year, three years, five, ten, and twenty years from now.

This creates a baseline that you can then tweak and adjust to find the perfect plan for you.

You can look at the impact of saving a little bit more, or even increasing your spending, and assess the impact it has on when you will reach your financial independence targets.

The ability to see when you’ll reach your FIRE goals allows you to do a stocktake on whether you’re pushing too hard on the savings side and instead can be enjoying your lifestyle a little more today.

I find that for a large chunk of people when we go through this process, they come to the realisation that they can actually enjoy today a little more and still get to where they want to be financially, when they want to be there.

If this is the case for you, in my opinion you should be enjoying the journey just as much as the destination.

The wrap

The FIRE approach to money has a lot of merits.

It puts you in the driver’s seat, taking control of your money and your financial future.

You focus on what you’re doing and make considered choices that set up the future you want.

And you ultimately are working to financial independence and aiming to get there promptly.

But it also has a dark side, because if you pinch pennies for the next couple of decades just so you can retire at 45, there’s a good chance that when you get there you’ll regret not enjoying the prime years of your life (at least a little bit) more.

It is possible to have the best of both worlds, if you’re smart with your approach.

Ben Nash is a finance expert commentator, podcaster, financial adviser and founder of Pivot Wealth. Ben is about to release his third book, Virgin Millionaire; the step-by-step guide to your first million and beyond.

Ben runs regular money education events to help you save more and invest smarter. You can check out all the details and book your place here.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.