For most working people, their standard of living is determined by their income—which, in turn, is tied to the career they’ve chosen. How successful that career is (and thus how high their standard of living) usually depends on factors like cultural background, education, training, intelligence, work ethic, assets, and networks. Differences in these areas mean that people’s financial capabilities (i.e. their income) vary widely.

To live a meaningful and fulfilling life, you need to manage your expenses and earn enough to cover them. Whether you’re still working or already retired, you must have sufficient income to sustainably pay for essentials like food, housing, transport, and medical care—as well as for any discretionary spending that supports your lifestyle. That’s why it’s crucial to strike a balance between what you earn and what you spend, and to ensure you don’t spend more than you can afford.

Most people spend their entire lives working simply to earn enough to afford their lifestyle. The higher your preferred standard of living, the more you have to spend—and the higher your income needs to be. But if you’re comfortable with a simpler lifestyle, you can spend less and get by on a lower income.

The big truth about life—something I only truly grasped after retirement—is this:

You spend your entire life working just to save enough to eventually retire!

Think about it. You don’t just work to support your spouse and kids, or to give your children an education, or to flaunt your wealth with a fancy house or a holiday home. Not even to afford a brand-new car every three years—though, of course, all those things matter too. We need to live and enjoy life. But the more we spend on these things—and the longer we do so—the less we save for retirement.

Remember:

• The longer you work, the more you can save for retirement.

• But the longer you work, the less time you’ll have to enjoy your retirement.

The recipe for a successful retirement is simple:

Become financially independent as soon as possible.

So when exactly are you financially independent? It’s when your investments generate enough annual income to cover your post-retirement expenses. Once you reach that point, you don’t have to work anymore—and you can retire whenever you choose, regardless of your age.

But there’s one crucial milestone to reach on the road to financial independence:
You must get to the point where your monthly income exceeds your monthly expenses.
How do you get there? It’s not always easy—but the principle is straightforward: From early in your working life, live within your means. Spend as little as possible on non-essential items. Essentials are a given. But never spend more in a month than you’ve earned. Aim to create a frugal lifestyle where, from as early as possible, your income exceeds your spending—and then invest the surplus in suitable retirement investments. The earlier you start, the sooner your investments will grow large enough to generate returns that cover your post-retirement expenses.

Different people reach this surplus point at different times. It’s obviously a function of how much you earn and how much you spend. If you’ve spent your entire working life pouring money into lavish homes and flashy cars, you might wake up in your 50s or 60s only to realize the truth—and by then, it might be too late.

Life’s realities often force younger people to delay reaching this turning point. But often, it's also just an excuse to live extravagantly for longer. As I’ll show later, even a small monthly investment, started early in life, can make a huge difference to your retirement in the long run.