Must a shaykh renounce the world and live as an ascetic?

A shaykh does not have to be one who has denounced and abandoned the world. Rather, it is the way of the Beloved Prophet ﷺ to have a family, earn the living, yet keep the worldly desires at bay.

Among the important attributes of a shaykh is that his heart be void of worldly affairs and firmly attached to Allah and His Last Prophet ﷺ. The scholars, describing a few of the attributes of a true shaykh, say that he does not seek this world by his religious learning, that he is cognizant of this world's wretchedness and aware of the next world's permanence and the triviality of this world, and that he declines luxury in worldly affairs. [al-Ghazali, Ihya Ulum id Din, vol. 3]

Allah's Messenger ﷺ told the believers whom to stay close to: "If you see a person endowed with abstinence in this world and the trait of speaking less, stay close to him for he is bestowed with wisdom from Allah." [Bayhaqi, Shu'ab al-Iman 4985]

Tasawwuf is a path where one keeps the company of those who have achieved the Divine love; it is not the path of seclusion, as some believe.

It has been the way of Tasawwuf to eschew concern with worldly affairs, and critics label the Sufis as unproductive, yet Allah declares that He is the provider and Sustainer. So once the servant submits himself to Allah's worship, Allah fills his heart with virtue and the seeker finds peace, as the Qur'an says: "No doubt, by the remembrance of Allah the hearts find peace." [Qur'an, ar-Ra'd 13:28]

It is narrated that the Prophet ﷺ recited the verse, "Whomsoever Allah wills to guide, He expands his breast for Islam." He commented, "When light enters the breast it expands."

The Companions asked, "O Allah's Messenger ﷺ! Is there a way to identify this?" Allah's Messenger ﷺ replied, "Yes, avoidance of the abode of deception, this world, attention to the abode of eternity and preparation for death before its descent." [Bayhaqi, Shu'ab al-Iman 10552]

The hadith refers to the state of Iman and ihsan, the spiritual excellence, where the worldly desires no longer cling to the heart and the seeker is focussed on the preparation of the afterlife.