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“I know all the rules but,

the rules do not know me.


After listening to the 200th episode of the Dough Roller podcast, I answered the call to be a contributor to the website.  I will share my experiences with building wealth and becoming a DIY investor and tax planner to prepare for our very early retirement.

I was listening to music last night while pondering where to start writing about these topics. The Eddie Vedder song “Guaranteed” came on. The above quote is a lyric from that song. It pretty well sums up everything I’ve learned about achieving extreme early retirement.

Personal finance is littered with many “rules”.

Some of these rules are law. You are taxed X% based on earning $Y. You can defer up to $18,000 into a 401(k). The list is endless. These laws must be followed, but can be used greatly to your advantage if you take the time to understand them and apply them to best fit your individual situation.

There are also many rules that are simply guidelines. Your mortgage should not exceed 28% of your gross income. You can afford a car payment of $X/month based on your income and credit score. You are allowed to borrow $X/year to fund your college expenses. These are simply rules developed by lenders to protect themselves. However, many people know these rules and follow them more closely than the actual laws.

Finally, there are the unwritten rules. When you graduate, you get a job.  You work 8 or more hours a day, 5-6 days per week.  You use your paycheck to buy a house, a car, and other “stuff.” Wash, rinse, and repeat until you retire when you’re 60-70 years old.  What neighborhood you live in, how big your house is, what car you drive, and the number and type of toys you own are determined by what you can “afford.” The more you make, the more you spend.

Nearly everyone follows these rules. This is why the vast majority of people from across the income spectrum live essentially the same existence, centered around 40+ hour workweeks until age 60 or later.

The Only Rules That Matter

I’ve spent the last 3 years reading and listening to everything I could get my hands on to learn how to retire early.  I will share the three simple rules that I’ve learned are the most important to get started on your own path to early retirement.

Rule 1:  Be Different

Albert Einstein has been quoted as defining insanity as “doing the same thing over and over again and expecting different results.”  Luckily for you and I, we don’t have to be Einstein to retire early.  However, we do have to do things differently than the masses if we want to achieve this drastically different financial outcome.  To think otherwise would be insane.

Statistics provided by Freddie Mac show that about 90% of Americans buy homes with 30 year mortgages.  Imagine the difference in your finances if you simply chose a less expensive home that you could pay off in 5-10 years.  Not only would you eliminate 20-25 years of paying interest to a bank, but less expensive homes also tend to have lower upkeep costs, utilities, and taxes and less pressure to “keep up with the Joneses” next door.

Another option would be to rent a small apartment close to your work and most common activities.  This would drastically reduce your housing and transportation costs (typically the two biggest budget items for most people) with one simple decision.

Getting even more creative, you could use a mortgage to buy a multi-unit home and live in one unit while renting out the other units to eliminate your housing costs and even make some money in the process.  You are limited only by your imagination when you start making up the rules instead of playing by those made up by someone else.

You can take similar actions with education, cars/transportation, food, travel, investing, and tax planning that can have massive impacts on your finances.  Many of these decisions require minimal effort and produce massive impact on your path to early retirement.  The possibilities to do things differently are endless.  However, you must consciously make the choice to be different if you want to retire early.

Rule 2:  Master the “Golden Rule”

The “Golden Rule” of finance is simple.  Spend less than you earn.  Invest the difference wisely.  Become wealthy.  You don’t need to be great or extreme in any one area to retire early.  However, you must learn to be good in all three.

It is important to earn an above average income.  This makes saving money possible while building the lifestyle you want to live.

However, you don’t have to earn a seven or even six figure income to achieve this goal.  Most of the people in the extreme early retirement community work or have worked pretty typical jobs such as engineers, computer programmers, health care workers, social workers, military members, and school teachers.

It is also important to control your spending.  This has several huge benefits.  Obviously, the less you spend, the more you have available to save.  Building a lower-cost lifestyle also makes it much easier to continue to support that lifestyle when living off of investment income.

Less obvious, spending less has great tax advantages.  In your working years, you can defer taxes when you are a high earner and realize your income over a long period of time at much lower rates, possibly as low as 0%.  Your capital gains tax rate in retirement is also much lower, again potentially 0%, if you only need to recognize a small income.

However, extreme early retirement does not require extreme frugality, characterized by suffering and sacrificing.  Success is about building a rewarding lifestyle that is sustainable without spending a lot of money.  Most extreme early retirees live relatively normal existences characterized by raising kids, traveling, and having normal hobbies and interests.

Finally, you must become a competent investor to meet the challenge of managing and growing your money to provide your living expenses and outpace inflation for a very long time compared to traditional retirement.  You can’t afford to make emotional mistakes based on greed or fear.  You can’t afford to pay unnecessary fees and taxes.

However, don’t be confused and think that you have to be the next Warren Buffet or have a special knack for picking winning stocks or IPO’s.  While I would not say any of those are impossible, neither is winning the Powerball.  However, that is not a great early retirement strategy either.

Almost everyone in the extreme early retirement community invests with one of four simple strategies:  1) passive index investing, 2) dividend growth investing, 3) rental real estate, or 4) some combination of 1-3.  You could teach yourself any of these methods with a couple of weeks of dedicated effort and a library card or internet access.

The “Golden Rule” is the one rule that must be followed, so make sure you take the time to truly understand it.

Rule 3:  Commit to Your Goal and Do It

I think learning the 3rd rule was the hardest of all.  My wife and I were always good at saving money and had the self confidence to march to the beat of our own drummer.  We knew we wanted something different for our lives, but never really defined what that was or committed to making it a reality.  We really needed two things to happen to commit to the goal of extreme early retirement.

First, we had to find our “Why?”  This happened after the birth of our child.  Within a few weeks, we knew we wanted to take a different path for our lives.  We wanted to have the time to spend with her while continuing to pursue other interests and passions.  We found this incompatible with a lifestyle centered around a 40-hour work week.

Second, we had to believe this was a reality.  We never knew anyone who retired in their 30’s or 40’s, so we weren’t sure it was actually possible.   We were inspired reading the blogs of those who had done or were doing exactly what we were looking to do.  If you are looking for your inspiration, start with this amazing resource of 39 bloggers who share what got them on the path to early financial independence and the most important actions to take to get there.

Once we knew why we wanted to retire early and believed it was actually possible, we fully committed to this goal.  Our progress increased exponentially.

Figuring out the technical aspects of how to retire early is pretty simple once you commit to the goal.  Without first figuring out your purpose, believing you can achieve the goal and developing a burning desire to do it, it is highly unlikely to happen.

What Rules Will You Follow?

If you want to retire far earlier than you thought possible, ignore the rules most people follow.  Instead, follow these three simple rules.  You will quickly find yourself on the path to financial independence and early retirement.  Guaranteed!

Author Bio

Total Articles: 24
Chris is a father, husband, and adventure seeker who loves to seek new challenges and continue to learn. He became a personal finance junkie obsessed with DIY financial planning to figure out how to retire by age 40. He wants to leave the rat race to fully pursue these things that he is most passionate about.

Article comments

Kenneth says:

Thanks, Chris. Yes it’s all about the right choices to ensure the golden rule needle is pegged to solid gold. Less house, car, cable tv, cell phone, eating out etc will get you there. I’m skinnier because we don’t eat out too often, my car has 4 wheels and drives the speed limit just the same as that shiny new BMW that just passed me, my modest home is mortgage free, and I’m retired! My time is now my own to do with as I please.

Chris Mamula says:


You hit the nail on the head that the things that are really key to financial success are quite simple. We did very well by limiting spending exactly as you describe while progressively increasing our income. Still we doubted what we wanted to do was possible. Reading the stories of other early retirement bloggers was vital to allow us to see that we weren’t totally nuts and this really is possible. Congratulations on your success and thanks for sharing.


Wendy says:

4 wheels to go the speed limit is a start. For thosecurity of us that do majority of miles commuting or traveling on highways at 60+mph, the safety features on recent car models have saved my life more than once. No I don’t drive a BMW but my SUV is rated as one of the best as to safety etc. There are some expenses that help me live the life I want!

Chris Mamula says:


Thanks for taking the time to read and comment. I would agree that we all need to spend in accordance with our own values. However, I would personally disagree that driving an SUV to commute long distances is a good strategy to be “safe” or to build wealth. What about trying to eliminate your commute by moving closer to work or finding a job closer to your home? Even if this meant taking a lower paying job or paying more for housing, you could net more money by saving so much on transportation costs. At the same time, you would definitely be much safer eliminating the commute than the marginal safety improvement of driving an SUV and you would free up your time to do more productive and healthy activities. This is a great example of simply thinking differently than what most people do.