This essay, as stated, is based on conversations with Cathy and Alan Donegan, who retired at the ages of 35 and 40 respectively. The couple are originally from the UK and have been living a nomadic lifestyle since 2020. The essay has been edited for length and clarity.
Katie: Alan and I retired in 2019 after running our own business for several years. We heard about financial independence and early retirement after we got married, and we wanted it. freedom and lifestyle for yourself. We started our savings and investment journey in 2015.
Alan: In my 20s, I didn't earn very much. I was a bit confused – I had a lot of different jobs and ended up starting my own entrepreneurship consulting business at 28 years old. I spent my 30s figuring out my business, and it wasn't until I turned 30 that I started making a good living.
When you're in your twenties, a year seems like a lifetime, but you have so much potential and so many opportunities. We tell 20-year-olds that they are not even close to their best earnings.
Here are five things we tell Gen Zers who want to become financially independent or retire early.
1. Compound interest is your friend
Katie: In the finance world, there is this idea that you need to invest a million dollars, and people often say, “I will never make a million, that’s impossible.”
We constantly tell them that they don’t have to make a million. Accrual of interest will allow you to earn at least half of it is for you. At this young age, if you can just invest some money and let it grow over the years, that's phenomenal.
2. Find out how to spend
Alan: Another tip is to allocate expenses correctly. When people discover FI at such a young age, they get excited about the idea of retiring at 30. They think: Let me keep expenses to a minimum and do something like cancel a friend's wedding to save money. Don't do this – enjoy life.
Katie: Likewise, your enemy is lifestyle inflation, trying to keep up with your friends and society's expectations. You will have to resist pressure, such as buying a bigger house or a different status symbol when you get a certain promotion. Most people increase their spending when they start earning more.
Alan: Happiness shouldn't cost money. This could be cooking dinner with friends, playing board games, going for a run, or arm wrestling with a neighbor.
Find out where you get your happiness from and invest your time, energy and money there. I don't get any happiness from expensive watches or expensive random things, but I love Marvel and invest my resources there.
3. Have these four accounts
Katie: Plan out your basic expenses for three to six months in case something goes wrong, e.g. lose your job. Set up another account with a small amount of cash for planned expenses over the next couple of years, such as a car, money saved for a vacation, or other short- to medium-term expenses.
Alan: Everything else should go into tax-advantaged accounts. And after you use up your tax benefit, invest the rest in a brokerage account.
4. Don't stop learning
Alan: 20-year-olds don't spend enough time learning on their own. The thought is this: I did my education, I was educated at the university, and now I am educated, and that’s it.
Traditional education will get you a salary, but lifelong learning will bring you a fortune. Reading books, studying, taking courses, learning from people who are excellent at what they do and modeling them will really help you. Ask people how they got their current job or what they would be doing if they were your age.
Education should not stop after leaving school. It must begin.
5. Focus on your health
Katie: Another thing that you should study and that we are studying now is health and things like vitamins and mineral supplementseye masks for better sleep and water.
You don't have to optimize everything, but try to follow 80-20 rule: Eat well, sleep well, move 80% of the time and have fun the other 20% of the time.
