Early Retirement and the Fallacy of Budgeting

Good health is holistic. It requires a combination of exercise, diet, and sleep to promote your perpetual well-being. There’s no “silver bullet” for physical and mental fitness. 

The road to retirement is no different. 

Reaching your financial goals requires a steady income, a savings plan, and investing strategies. There’s no “silver bullet” for retirement, either.

So why has budgeting been heralded as the magical remedy for early retirement? We see it all the time in major financial publications and blogs. 

They claim that after you “skip that weekly $5 latte,” after you “cancel your Netflix subscription,” and once you “eat at home more,” the retirement red carpet will magically unfurl with piña coladas in tow. 

But let’s be real: if budgeting was the solution, wouldn’t most of us already be on the beach?

Listen, budgeting is important — there’s no doubt about it. But here’s the larger truth: in order to retire on time (much less retire early), budgeting alone won’t get you where you need to go

You need a robust, forward-thinking plan for augmenting income, growing investments, and reaping meaningful fiscal rewards along the way. 

Budgeting is fuel for a sound financial plan, but it’s not the engine of financial freedom itself. 

Recent statistics bear this out. 

Part One: Savings Rates in America

Thanks to inflation, practically everything costs more right now.

We feel the pain at the pump, at the supermarket, and everywhere in between. And while Americans are leaving their cars in their garages and cutting costs wherever possible, they’re still struggling to save. 

In fact, the average American has $9,000 less in savings now than they did just a year ago.  

In times like these, budgeting can help lessen the pain, but it can’t fix the problem. And it certainly can’t help pave the path to retirement. 

Speaking of retirement, prices are so stratospheric that 25% of Americans have now been forced to delay retirement. Inflation isn’t just costing money; it’s chewing up time

How are millennials and Gen Zers faring?

Until now, younger Americans have actually excelled in savings — especially Gen Z, over 70% of whom have made a concerted effort to plan for retirement. 

Unfortunately, inflation has largely nullified these gains and forced over 60% of 18 to 34-year-olds to reduce their savings contributions. 

Part Two: Spending Habits in America

While savings are down, spending remains rampant. 

In fact, over 61% of Americans are living paycheck to paycheck — up nearly 10% from 2021. 

Worse yet, 90% of households with incomes under $20,000 are spending far more than they earn. Thanks to inflation, these households are often forced to borrow from their savings.

And while low-income families are hit hardest, high-income families are also feeling the heat.
In fact, 36% of paycheck-to-paycheck Americans earn over $250,000 a year

You read that correctly. 

There are 50 million Americans that make a quarter of a million dollars each year, and 36% of them aren’t saving a cent of it. The vast majority of their income is going to food, housing, healthcare, and transportation. 

Though lifestyles may vary, living paycheck to paycheck has the same net result, whether you make $25,000 or $250,000 a year. 

Could cutting costs help? Maybe. But as these statistics show, most Americans have already reduced spending — and tapped savings — to fight inflation. And they’re still struggling to make ends meet. 

The fallacy of financial budgeting and early retirement has been roundly exposed. 

Part Three: A More Fruitful Mindset

In most cases, early retirement is achieved through three means: 

  1. Inheriting a fortune.
  2. Consistently increasing (and investing) your income over time.
  3. Extreme budgeting that results in an uncommonly low quality of life. 

As it’s likely safe to assume that you intend to enjoy your life now while preparing for tomorrow, option two seems like the smartest approach. The best thing you can do is to adopt a new mindset — a paradigm that propels you to take action and move forward with confidence. 

Again, budgeting has value, and it should absolutely be a part of your financial life no matter who you are. Even if you’re an athlete on a multi-million dollar contract, budgeting is important. 

But here’s the thing: budgeting is about working smart with the resources at hand.
To retire — and to retire early — you must find ways to generate more money in the short-term.

In other words, you need to think bigger.  

Here are three ways to stamp out a scarcity mindset and develop a more abundant outlook:

1. Eliminate Your Debts

Debt is the destroyer of wealth. 

Whether your debt stems from medical bills, student loans, or credit card payments, make an effort to get out of the red. 

High interest rates quickly turn the smallest debts into major financial burdens, and debts can undo the best-laid retirement plans. After all, “every dollar you owe reduces your income in retirement.” 

Start early, and build your retirement nest egg on a debt-free foundation.

P.S. Looking for a sneaky (but powerful) way to help save? Picking a no or low-fee card can help you save serious money while maximizing rewards along the way. 

2. Increase (& Diversify) Your Income 

When it comes to money, more is more. 

If you’re in a position to ask for a raise, go for it.

If you’re interested in pursuing a new job, now is the time. There are over 11.4 million job openings on the market! 

Or, maybe you have certain skills that could become the basis for a part-time job. If that’s the case, don’t hesitate to leverage and monetize your talents. 

Multiple income sources will help you pay debts, build wealth, and prepare for retirement.

3. Boost Your Human Capital 

You are your greatest asset. 

No, that’s not a Hallmark card. It’s the truth!

The more you invest in yourself, your skills, and your education, the greater your “human capital” will be. 

Maybe that means getting a master’s degree, taking classes in a specialized field, or starting a small business. 

The choice is yours. Whatever path you pick, have confidence that the time you invest in yourself today will yield tangible income tomorrow.

To borrow (and abridge) from Benjamin Franklin, “an investment in yourself pays the best dividends.”

Get Rewarded Now (And Later)

You work hard for your money, and you deserve to be rewarded for it. 

At Flyp, we want you to level up in your financial life and enjoy yourself in the process. 

That’s why we offer the Flyp Visa® Debit Card — to help you get ahead with up to 110% cash back on purchases. 

We’re not only talking about no hidden fees and empowering you to get paid up to two days early, but we’re also talking about our detailed Knowledge Center to help you take command of your financial life. 

Ready to download the app and flyp the script on banking? Click below to get started.

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Vega, Nicolas. “Americans now have an average of $9,000 less in savings than they did last year.” CNBC. CNBC, May 21, 2022. https://www.cnbc.com/2022/05/21/americans-now-have-an-average-of-9000-dollars-less-in-savings-than-in-2021.html 

Roman, Edwin. “Yahoo Finance Retirement: Gen Z ‘is actually saving money’ while millennials aren’t, researcher says.” Yahoo. Yahoo, March 27, 2022. https://finance.yahoo.com/news/millennials-retirement-gen-z-saving-141949492.html#:~:text=According%20to%20the%20upcoming%20Center,26-41%20years)%20are%20putting 

Bove, Tristan. “Even rich people are living paycheck to paycheck.” Fortune. Fortune, June 2, 2022. https://fortune.com/2022/06/02/inflation-high-earners-paycheck-to-paycheck/ 

Iacurci, Greg. “Low earners were hit hardest by inflation as savings and pandemic aid dwindle, study finds.” CNBC, CNBC, February 25, 2022. https://www.cnbc.com/2022/02/25/low-earners-hit-hardest-by-inflation-as-savings-and-pandemic-aid-dwindle.html 

Gillman, Steve. “Peeing in a Bottle and 8 Other Crazy Ways People Save Money.” The Penny Hoarder. The Penny Hoarder, February 25, 2021. https://www.thepennyhoarder.com/save-money/reuse-dental-floss-9-weirdest-things-people-save-money/ 

Gaviola, Anne. “Why It’s So Easy For Pro Athletes To Blow Their Millions.” Vice. Vice, September 17, 2019. https://www.vice.com/en/article/wjwxmq/why-its-so-easy-for-pro-athletes-to-blow-their-millions 

Schmidt, John and Guy Birken, Emily. “Retirement Planning: How To Get Out Of Debt Before Retirement.” Forbes. Forbes, March 4, 2022. https://www.forbes.com/advisor/retirement/retirement-planning-how-to-get-out-of-debt-before-retirement/ 

Iacurci, John. “The job market is still hot — for now.” CNBC. CNBC, June 1, 2022. https://www.cnbc.com/2022/06/01/the-job-market-is-still-hot-for-now.html 


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