Retiring at 40 – 6 Ideas from my Unconventional Path to Early Retirement

A few weeks ago, I decided it was a good time to stop work, at least for a while. I'm still unsure how it will play out and I definitely reserve the right to go back to work in the future.  But for now, at the age of 40, I've retired.

When I reflect on my journey to retirement, I realize that I've taken a different approach to what's commonly recommended.  I want to share how I deviated from the norm in this regard with some stories from my past so you can consider whether these lesser spoken about strategies might work for you.

But before I go into what worked, let's look at how I started off on completely the wrong path ...

The Naive Beginning

At 27 I had a bunch of failed businesses behind me (off the top of my head I remember building a film review website, a Swindon Hotel reservations website, a web design agency and an IT training academy, all of which failed) and I had nothing to my name.  Actually, less than nothing if you take into account my 12k GBP of student loan debt.  

At this point in my life, I had a careless attitude to money. I'd make it and spend it. I had absolutely no financial sense.  My mindset was that one day I'd make a lot of money so I'd spend it knowing that I'd earn more in the future.

I was blind and naive.  Such a stupid attitude to money.

"That's not how rich people get rich" my business partner at the time casually mentioned in passing during a conversation that wasn't even about me.  He was referring to the fact that most millionaires are understated, frugal, live beneath their means and live next door (even though you might not know it).

At around the same time I closed my latest business, despite it gaining some traction, due to lack of capital.

And that's when it hit me like a ton of bricks.  

The business could have been saved even if I had just a small amount of savings. I could have hired the right people to cover talent and knowledge gaps that I had, and I could have kept the lights on for long enough for it to get it off the ground.

It became clear to me that my view of money was completely backwards and that I needed to save money aggressively in order to realize my dream of building a successful company.

The changes from my epiphany were instant, but it meant going back to square 1 to earn an income.

The following week I managed to land a job as a digital marketing specialist for a local travel agency startup and for the next year I saved at least 50% of everything that I earned.  After a year I had saved around 12k GBP and that money is what supported me when I co-founded my first successful venture in 2012.

This is the key takeaway for anyone looking to get ahead financially:-

When you have nothing, you simply have to do everything you can to save money. For me that meant going back to work, lowering my expenses drastically by living once again with my parents, cycling everywhere and not spending much money for an entire year.  It was a tough sacrifice at the time but I literally couldn't have built my first successful business, and ultimately ended up retired at 40, without that year of hardship.  

This saving philosophy of living beneath my means has been a core tenet of how I handle my personal finances and company finances for the last 12 years.  I'd even say that having this financial epiphany at 27 was one of the most pivotal moments in my life.  

Idea 1:- The earlier you adopt the saving and investing mindset, the better. Do everything you can (even at temporary great sacrifice) to build up a savings and investment pot as early as possible.  Even if you don't yet know how you'll use the money, focus on building that capital up anyway.  Do what other people won't do for a year or two like sharing an apartment, living with your parents, cycling to work, not going out as much etc. for a longer term strategy.  This is true regardless of whether you'll use the money to start a company or to invest.  Just do what you can to save.

I wish I'd learned this lesson sooner.

Now that's out of the way, here are the key points of leverage that allowed me to retire at 40:

Bootstrap a Company

This isn't for everyone, but bootstrapping Thrive Themes was huge for me.  I moved to Romania and disappeared for a few years to build the company with my business partner while using the 12k GBP savings for my day to day living costs.

Bootstrapping simply means to fund it yourself as opposed to getting outside investment.  It's hard at the beginning: money is tight so you have to get your hands dirty and wear many hats.  It's also common to lose money for a while and not be able to take a a salary.  But if you can grind to the point where the company starts gaining traction and becomes successful then it can allow you to increase your net worth 10x faster or more than being just a regular employee.  

The hardest part of bootstrapping is having faith and sticking with the project long enough to get through the dip.  Entrepreneurial habits are notoriously difficult in those first few years.  You're working harder than everyone else and earning less, if anything at all.   But at a certain point, if you can push through and find success, the payback can be beyond what you can imagine.   Unlike a salaried job, there is no upper limit.

The question I've often wondered is:- If the rewards of company building can be so disproportionate, why do relatively few people pursue the bootstrap strategy?

I've met many people who are smarter and more skilled than me including those in my own companies.  I'm 100% certain that these people could have started their own companies and done extremely well if they had chosen to do so.  

It's led me to ask myself what I did that these intelligent and capable folks weren't willing to do.   

I think the main difference is that I took a risk.

At the age of 29, I quit my job and moved to Romania (a country I'd never been to) to live with someone I'd never met to start a company with only 12k of savings. My family were totally against the idea and nobody really understood what I was doing and why.  

The emotional labor to trust my instinct and follow through on this plan to move abroad and start a company when everyone thought I was insane is exactly the point where I think most intelligent and capable people would have bailed.  

This is the key differentiator: it's not intelligence or capability but it's the willingness to commit and take a risk because I knew, deep down, that I didn't want to work a regular job.

And here's the funny thing about it - it wasn't really a huge risk.  

While it might seem to be completely wreckless, it was actually far more calculated than it may originally appear.  I did everything I could to lower the downside:-

1. My business partner and I had already worked together remotely on a small project.  The project went well and was successful on a minor scale.  This was enough proof that we were compatible, got on well and could work well together.
2. I had already saved up 12k that I could live from. This meant that I didn't need to go into debt.
3. I didn't have a family or relationship or anyone else that depended on me.  So I wouldn't risk letting anyone down.
4. The worst case scenario would have been that the business fails, I run out of money and return to the UK to find another job. That wouldn't be a great position at the age of 29 but I would have been young enough to rebuild.  I also would have learned a lot from the failure.

So actually, in essence I was risking a year of my life and some savings for an unlimited potential upside of building a successful business, feeling engaged in my life because I'm doing what I want to do, and attaining financial freedom at a relatively young age.  As it turned out, the company did well, and we eventually sold it in Jan 2023.

All things considered, it wasn't such a crazy risk to take.

In the unconventional path to retiring early, this is the next big idea:-

Idea 2:- When you're young, fit, healthy and have no commitments, it's worth taking calculated risks.  If I hadn't jumped on that plane to Romania to build that first successful company then it's likely I wouldn't be sat in Bali writing this blog post right now.  Don't be unnecessarily cavalier - take risks with huge potential upside but protect your downside by putting your stop losses in place.  These lopsided bets give you a chance of hitting a home run without risking everything.

Live and Hire Globally

I'm a UK citizen but haven't lived in the UK for around 12 years or so.  The main reason for this is that I've always been adventurous and had a desire to experience different places, but an additional benefit is that it's been very cost effective.

I've used global arbitrage to cut down expenses both in business and personally:-

1. I moved to Romania to work with a talented development team that could help build our startup during a period when it was highly cost effective.  We were able to cut dev costs by around 50% to begin with, over time they started to catch up with the west as more and more companies followed suit but that gave us enough leeway to gain traction.
2. I spent a lot of my time in South East Asia (Bali, Philippines, Thailand, Vietnam) where the cost of living is far cheaper than the UK.  
3. We built a customer support team in the Philippines (this went on to become its own company, LevelUp) where there is a plethora of English speaking talent at lower cost.

As I've mentioned, from the age of 27 I was very focused on living beneath my means and saving and investing my money.  Living abroad allowed me to do that with a higher quality of life than I could have while living back in the UK.

Even today, while writing this in Bali, a breakfast for two including two lattes this morning cost me 248,000 IDR which is £11.70 or $15.00 USD at the time of writing.  I guess that's around 50% of what I would pay in the UK.

Idea 3:- If you're able to become location independent, consider living and working in a jurisdiction that serves as a tailwind for financial accumulation and growth, especially in the first few years.  There are still many very livable places (Cambodia, Sri Lanka, Mexico, Colombia, Thailand, Philippines, Indonesia, Vietnam to name a few...) around the world in which you can live comfortably on $2k per month.  There's also a lot of hungry, talented people globally that are looking for the opportunity of work.  

Optimize Tax Residency

Once your business starts taking shape, it's worth optimizing your global tax situation.  I'm not an expert in this domain so this is not financial or legal advice but there are ways in which you can reduce your global tax burden (both company and personal) by incorporating and living in certain jurisdictions.

For example, some countries use the territorial tax system which essentially means that foreign-sourced income is not subject to personal income tax (caveats apply for each jurisdiction).   Note also that the advantage of being in a territorial tax system depends on your citizenship - as it stands US citizens pay tax on global income regardless of their residency status, for example.

Some countries also have no or low corporation tax on company profits.

So one potential option is to become a legal resident in a country with low tax foreign sourced income while operating a business in a jurisdiction that has low corporation tax.  

Idea 4: Go where you're treated best. Countries offer various incentives to attract foreign investment and residency applications, which means that you can potentially access a higher quality of living at a lower overall effective tax rate than your home country.  This can be a high point of leverage if your startup does well.

Build up Liquid Capital Ready for Opportunities

Another factor that helped me to retire early is that we were cautious financially in the business.  Even when the business was largely profitable, we didn't increase our salaries, instead opting to increase retained earnings and liquid capital within the company.

By liquid, I mean capital that can be accessed within a week or two if needed. So stocks and cash would both be considered liquid in this regard.

In around 2021, we identified what we believed to be a big opportunity and so were quickly able to invest a substantial amount.  Within a few years, this investment had almost 10x in value.  In fact, we nearly made more profit from this investment than from the operation of the company over its lifetime.

Again: survivor bias, but being reserved and building up company capital ready for an opportunity was highly beneficial for us in retrospect.  Of course, sometimes it's worth just reinvesting into your business to grow faster and decrease tax liability - it obviously depends on what stage you're at.

Idea 5: If things go well, and you want to take some chips off the table, focus on building up a corporate capital reserve in case an opportunity arises.  

Figure out your Escape Velocity Number and Track Your Progress

By escape velocity I mean this:-

What amount do you need to be invested such that the income produced from said investments grows more than your expenses?

At the point where your investments produce more income than you need to live then you're ready to retire.  

A relatively simple and frequently cited rule is the 4% rule.

The 4% rule is a retirement guideline suggesting you can safely withdraw 4% of your investment portfolio per year without running out of money over a 30-year period.

However, If you plan to retire at the age of 40 then it's likely you'll need your investments to last for longer than a 30 year period so I'd recommend reducing to a 3% withdrawal rate.  

If you have $3m invested then you can theoretically withdraw $90k USD per year (3%) for 40 or 50 years and never run out of money. If your expenses are less than $90k, then you've reached escape velocity and you can retire.

In my opinion, you need to know what this number is for you early on so that you can devise a plan to work towards it.  This is especially true if you're trying to retire at 40.

Some people call this your f*** you number.  Or your FIRE number.  

Once you have this figure in mind, I recommend tracking your finances each month so that you have a list of all your assets, liabilities and your net worth. Include the balance sheet of any companies that you own in your calculation in proportion to your shareholdings.  Aim to see your net worth increase each month as you progress towards your number.  

Being cogniscent of your number and tracking your progress towards it is motivating and keeps you on track for the bigger picture goal. 

Idea 6: Define how much you need to reach financial escape velocity and track your progress towards it each month in the form of a net worth spreadsheet.  Use this to determine your spend rate and whether you're on track for retiring early.  Adjust spending where needed.

The Unconventional Path

The more common path to FIRE is to get a job, live beneath your means and save as much as half or more of your take home pay for 20 years, invest in low cost global or US index funds, max out tax efficient accounts each year and focus on increasing income through promotions.

This is not a bad strategy at all.  It's likely to succeed.

My unconventional path worked out mainly because we managed to build a successful company and capitalize on it.  Again, survivor bias at play here: for every one person that succeeds in this approach there might be a few people that fail.  It's riskier and not for everyone, but the rewards are far higher if you execute well.

Here's a reminder of my unconventional path listed above:-

1. Do whatever you must do to save money/capital as young as possible
2. Bootstrap a startup
3. Live and hire globally
4. Optimize tax residency
5. Build up Liquid Capital Ready for Opportunities
6. Figure out your escape velocity number and track monthly

Whether you follow the entire strategy or just take parts of it, or none of it, is completely up to you.  This is just what worked for me.

Some Useful Resources for Early Retirement

• FireCalc - my favorite simple retirement calculator that gives you a snapshot of your readiness using history as a guideline.
• FIRE subreddit - FIRE stands for Financial Independence Retire Early.  This is a forum where people discuss FIRE readiness and strategies
• Azul Wells - A financial advisor with insightful advice for retirement
• PensionCraft - Ramen from PensionCraft has great insights and educational content for retirement and investing
• James Shack - A financial planners specializing in retirement from the UK with some really helpful videos on retirement readiness and insights from working with his own clients.