What Early Retirement Experts Can Teach You About SavingA lot of people struggle to save money, with the average American saving less than 5% of their disposable income. However, while many are scraping by, others are thriving, putting away large portions of each paycheck while living lean to reach the goal of early retirement. These people are part of the FI/RE community, and they’re discarding traditional ideas of retirement and consumption in the pursuit of economic freedom. While their methods are drastic, they’re also effective, and based on fairly simple financial principles. If you’re curious about FI/RE, or you’re just looking for advice on how you can save more money, keep reading.

What is FI/RE?

FI/RE stands for “financial independence/retire early,” and it’s a way of living and thinking about money that uses frugality, intense saving and investing to grow net worth and achieve financial independence early in life. FI/RE devotees aim to save at least 50% or more of their income so they can enjoy an early retirement in their 30s or 40s, living off investment income, real estate income and side gigs for the rest of their days. While FI/RE does require a good salary to realistically achieve, it’s probably not as much as you may assume, with many early retirement success stories involving people who earn mid-to-high five figures. It also often demands a more liberal definition of “retirement” than most people have, with many FI/RE retirees keeping their jobs with reduced hours or monetizing hobbies to occupy their time and supplement their savings with extra cash.

What are the principles of early retirement?

The core principle behind FI/RE is just to build wealth by saving more than you spend, but taken to the extreme. According to several prominent voices in the FI/RE community, such as early retirement blogger Peter Adeney, you are financially independent once your net worth equals 25 times your annual expenses. To achieve this, FI/RE practitioners make big lifestyle adjustments to maximize their savings, such as moving into modest homes or apartments close to work, taking public transit, cutting their cable and learning practical skills like plumbing and sewing. They also make ample use of tax-deferred retirement accounts to reduce their taxable income and invest in low-cost index funds as well as real estate so their money can earn them more money. That’s in addition to increasing their income, either by taking on extra hours or responsibilities at work, freelancing in their free time, or a combination of the two.

There is also a philosophical component to early retirement, which focuses on finding joy in simple living and changing your relationship with money. Saving is tough, because you feel the sacrifices you make to save money immediately, but don’t see the results for a long time. Being content with cooking your own meals or shopping for clothing at thrift stores can make living frugally much easier, as can thinking of your money in terms of the time it took you to earn it. For instance, if you make $20 an hour, and you spend $100 on a meal, asking yourself if that meal was worth five hours of work can help you determine whether you valued it or not.

What can FI/RE teach average savers?

While there are FI/RE adherents who claim that anyone can retire early if they work hard enough, the truth is that the level of serious saving FI/RE requires just isn’t feasible for a lot of people. However, just because you can’t retire by the time you’re 30 or 40 doesn’t mean you should completely ignore FI/RE’s practices. Even if your goal is to retire at 70 or just save up an emergency fund, looking at the tenets of early retirement can help you. Here are some lessons from FI/RE that almost anyone can adapt to their own saving habits.

Every bit helps: Many FI/RE practitioners are data-oriented people, and they use spreadsheets, graphs and numbers to optimize their earning and saving strategies. They recognize that small improvements are still improvements, and will let them become financially independent a little faster. For instance, getting a good cash back card that gives you 1% or 2% cash back on purchases that you’re already planning to make or a travel rewards card that earns miles can help you stretch your money a little further, and using one requires almost no extra work on your part. You can earn another 1% or 2% back by keeping your saved money in a high-yield online savings account instead of a checking account.

Think long-term: Early retirement isn’t about getting rich quick, it’s about building wealth slowly. Even your small habits have a cumulative effect that, over time, can produce major results. For example, let’s say you make a budget and manage to get rid of $100 a month in wasteful spending. While $100 may not seem like much at the time, that’s $1,200 a year. Over 20 years that $100 a month totals $24,000, and if you can invest that money, then it will earn interest and provide even higher returns. Tracking your saving can help you adopt more of a long-term mindset, as it can let you see the long-term results of your efforts more easily.

Consider value: Value is the heart that drives FI/RE’s frugality practices. Conscious frugality isn’t really about denying yourself everything that costs money, it’s about limiting your spending to things you value. Identify the things you buy that you truly enjoy, and which things you can live without or that you buy out of routine. Once you narrow down the things you value, see if you can manage to still indulge in them for less money. For instance, if you like eating out, you can try to find the best inexpensive restaurants near you, or if you like to travel, you can take a camping trip to your closest national park.

Don’t be discouraged if you can’t save at the same pace as the FI/RE community, as they’re more the exception rather than the rule. Remember that every dollar you save today is a dollar that can make tomorrow easier. For more tips on saving well and spending wisely, follow our personal finance blog.