The following is a guest post by James at Free in Ten Years. If you are interested in guest posting at Club Thrifty, please see our guest posting guidelines.

Are you tired of working? Do you want to enjoy life without work? Learn how to reach financial independence and retire within the next ten years!We all like to save money, to extract every last bit of value out of our limited financial means, but what is the object of all this frugality?

For most people, being frugal allows for spending in other areas which are considered more important – perhaps saving for the purchase of a house, a child’s education or just a much desired big-ticket item. These are all possibilities given to us because we are thrifty people – or will be soon if you hang around Holly and Greg’s site for long enough.

I want to encourage you to think bigger for a moment. What if I told you that you could retire in ten years?

It’s much more attainable than most people realize and doesn’t require an extremely high income or putting your family in the poor house. What it does require is dedication to the goal and a willingness to sacrifice many of the consumer products we are told we can’t live without. It does require running an extremely lean budget, but it is certainly possible.

How Can I retire in Less Than 10 Years?

The idea is to reduce spending to the point where you are saving a large percentage of your income each year which is then invested. When the proceeds of those investments exceed your new very low spending level, you have theoretically reached theoretically financial independence and can retire!

The maths is extremely simple which I’ll demonstrate with an example:

  1. John earns $80,000 after tax and deductions per year
  2. He lives on $20,000
  3. Each year he invests the $60,000 into a low cost investment vehicle like an index fund and receives 6% compounding interest.
  4. At the end of ten years he’s got $819,396.73 in his investment account (not taking into account tax and fees)
  5. His investments will now give him roughly $50,000 per year (of course, this is on average and over the long term)
  6. He can take out his $20,000 each year (less than a 3% withdrawal) ensuring his money is never eaten by inflation – he can also increase his annual spend to keep up with inflation and never exhaust his stash.

There are of course people who can’t immediately spend 25% of their salary because of lack of work, studying, children, debt or a lack of desire and a whole host of other reasons – but many can. I want people to realize that working until you are 65 is not the only option you have.

I have decided that I don’t want to work in an office for my whole adult years – the most productive time I have on earth will be consumed by work unless I do something about it. I’ve decided to take some short term pain so that I can wake up not long from now and not have to go to work. The list of things to do in an early retirement are endless. Think of all the things you’d do if you didn’t have to go into work for a living – financial independence gives you options.

The Best Part of Reaching Financial Independence?

You don’t have to retire just because you’re financially independent!

Reaching the point where you don’t have to work doesn’t mean you have to retire if you don’t want to. It might mean that you can start pursuing a line of work you were too scared would fail, or go back to school to retrain in an area you are truly passionate about – or work for a charity. The list is endless. If you continue to do paid work, you do so knowing you could stop at any time and also that you’re increasing the safety margin of your investments for when you do retire.

Living on a Fraction of Your Income Won’t Make You Unhappy

Ever since I started living on a fraction of my income, I have become happier, more sociable and less stressed. The reason? I know that my working life has an end in sight and it gives me confidence at work because I am less reliant on it – I don’t feel the need to constantly have the latest technology because I have replaced my old expensive hobbies with free alternatives and I’m happier for the change.

I run, I garden, I read, I educate myself about the world, and spend time with friends. I have friends over to play board games instead of spending $50 at the cinema to sit in silence.

Being rich is relative and if you think you’ll be happier at a certain level of wealth or when you accumulate a particular possession, you’re wrong. Instead, I’d urge you to look at using your money to give yourself more of the one precious commodity we all can’t buy: your time here on earth.

I want to look back at my life and look at a time filled with rich experiences and friendships, not office politics and meetings.

Have you thought about an early retirement?

James blogs at Free in Ten Years where he is documenting his life as a 27 year old getting ready to retire. You can connect with him on Twitter.