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How Extreme Savers Can Retire By 40

NEW YORK (MainStreet) —Financial advisers have long recommended saving between 10 and 15% of your income for retirement. For a growing number of people around the world, that just isn't enough.

Instead, these extreme savers have decided to save half or more of their income to get on the fast track to financial independence. While the average American family has a savings account of just $3,800 and a quarter of American families have no savings at all, these men and women have found some key habits to avoid the trap of living paycheck to paycheck and struggling with high credit card debt.

Housing, Transportation Choices Key

While a lot of personal finance gurus focus on things like the "latte factor," extreme savers focus on the big things like housing and transport, says Olivia Campbell, who saves around 75% of her $90,000 salary. "I don't have much interest in cutting down on little expenditures," Campbell says. "They really don't add up that much, and its often little things like the coffee with a friend that add a lot to your happiness." Instead, Campbell keeps housing and transport costs low.

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So does U.K.-based Chenda Forrest, who credits her housing situation for her 50% savings rate. "I live in a small shared flat close to local amenities, which means I can live without a car," she says. "It seemed such a waste of my working hours to have nothing to show for it. A 50% saving rate always seemed a simple goal to have; whatever I spent I banked."

Even in unwalkable neighborhoods, extreme savers find a way. Suburbanite Stephanie Williams saves about 65% of her $34,000 yearly salary, crediting her lack of a car and shopping ingenuity to her success. "I found a used dog stroller on Craigslist that I use to cart home 20 pound bags of rice and flour from Costco rather than take a cab or buy smaller bags at a higher price," she says. While that may sound extreme to some, Williams says she doesn't care, because she's on track to retire before 40. "Work is overrated. I would rather spend my life traveling and pursuing my hobbies than chained to a desk," she says.

The Fast Track to Retirement

It takes less than one year for some of these extreme savers to have enough of a nest egg to cover a year of expenses, bringing retirement closer than most could imagine. "I originally intended to retire or become financially independent by 40, but I'm now on pace to reach that mark by my 37th birthday," says Jason Fieber, 30, of Sarasota, Flor. who tracks his savings progress on his blog.

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While it depends on how your investments perform, how long you expect to live, and what income you require in retirement, most extreme savers find they can retire within 15 to 20 years if they consistently save half of their income. "I think the most motivating factor that can encourage saving is asking yourself when you want to retire," Forrest suggests. "The math is so simple to calculate, yet most people are completely clueless."

Choosing Simplicity and Freedom

For extreme savers, living cheaply is less of a sacrifice, and more a step toward simplicity and freedom. "Simplifying my life has brought me clarity and a peace that no material object ever could," says Fieber. "In order to achieve a high savings rate I gave up my car, and now I ride the bus. I also have a 16-year old 49cc scooter that gets me around town in a pinch." To boot, he also eats mostly at home and avoids buying the latest and greatest, allowing him to save 60% of his net income. "I tend to take solace in my easy, enjoyable life where I put a premium on time and freedom."

Fieber, who earns $55,000 annually working at a local car dealership, has gone from having $5,000 in savings to having $100,000 in dividend-yielding stocks in just three years. "My job is not glamorous or particularly high-paying, which just goes to show how possible all of this is," he says.

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