This as-told-to essay is based on conversations with Katie and Alan Donegan, who retired at the ages of 35 and 40, respectively. The couple is originally from the UK and has been nomadic since 2020. The essay has been edited for length and clarity.
Katie: Alan and I retired in 2019 after running our own separate businesses for several years. We heard about financial independence, retire early, after we got married, and we wanted that freedom and lifestyle for ourselves. We started our savings and investing journey in 2015.
Alan: I didn’t earn very much in my 20s. I was a bit of a mess — I had lots of different jobs and eventually started my own entrepreneurship consulting business at 28. I spent my early 30s figuring out my business, and it wasn’t until my late 30s that I started to make a good living.
When you’re in your 20s, a year feels like a lifetime, but you have so much potential, and there is so much opportunity coming for you. We tell 20-year-olds that they are not even anywhere close to their best earning years.
Here are five things we tell Gen Z’ers who are looking to become financially independent or retire early.
1. Compounding is your friend
Katie: In the FI world, there is this idea that you have to have a million dollars invested, and people often say, “I will never earn a million, there’s no way.”
We keep telling them that they don’t have to earn a million. Compounding will earn at least half of it for you. At this young age, if you can just invest a little money and let it grow over the years, it is phenomenal.
2. Learn how to spend
Alan: Another piece of advice is to get the spending balance right. When people discover FI at such a young age, they are excited about the idea of retiring in their 30s. They think: let me pin my expenses to the floor and do things like ditch a friend’s wedding to save. Don’t do that — enjoy your life.
Katie: Equally, your enemy is lifestyle inflation, trying to keep up with your friends, and societal expectations. You have to stand up to pressures such as acquiring a larger house or another status symbol when you secure a certain promotion. Most people increase their spending when they start earning more.
Alan: Happiness doesn’t have to cost money. It could be cooking dinner with friends, or playing board games, going for a run, or arm wrestling the neighbor.
Work out where you get your happiness from and invest your time, energy, and money there. I get zero happiness from expensive watches or expensive random things, but I love Marvel, and I invest my resources there.
3. Have these four accounts
Katie: Build three to six months of your basic expenses in case things hit the fan, such as losing your job. Have another account with a little bit of cash for planned spending over the next couple of years, such as a car, money saved for a holiday, or other short- to medium-term expenses.
Alan: Everything else should go into tax-advantaged accounts. And after you’ve used your tax-advantaged allowance, invest the rest in a brokerage account.
4. Don’t stop learning
Alan: 20-year-olds out there don’t spend enough time learning on their own. The mindset is: I’ve done education, education was done to me at university, and I’m now educated, and that’s it.
Traditional education will earn you a wage, but lifelong learning will earn 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 do if they were your age.
Education shouldn’t stop when you leave school. It should start.
5. Focus on your health
Katie: Another thing you should learn, which we are learning now, is about health and things like vitamins and mineral supplements, eye masks for better sleep, and water.
You don’t have to optimize for everything, but try to follow the 80-20 rule: eat well, sleep well, move your body 80% of the time, and enjoy yourself the other 20% of the time.
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