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HOW TO RETIRE YOUNG…AND MAYBE EVEN RICH

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How to Retire Young

Have you ever thought about retiring young? Have you ever wondered what it would be like to not have to work till your 65 to 70 years old? If so, then this post about how to retire young is for you.

Before I provide you with some critical insights on how you can begin the process of retiring young, let me share with you this short little story.

How to Retire Young

I was just a few years into my budding career when I came across a book that provided me with a simple secret on how to retire young, and maybe even rich.  Undeniably, it was a book that changed my life forever.

In those early days just after college, all I read at the time were Philosophy books.  Books by Voltaire, Nietzsche, Emerson and the like.  In fact, I was on my way to the Philosophy section at Barnes & Noble the day I crossed paths with that life-changing book.

There was something that drew me to this book on that fateful day.

I am not sure if it was the title of the book or it’s off-beat purple color that caught my eye.  All I know is that once it caught my eye I just had to pick it up.

Fortunately for me, the title indicated advice that I was in desperate need of.

At the time I had just recently boomeranged back to living with my grandparent’s, I had a college degree in hand along with a good job at the time, but I was not the greatest at handling money.   I was great at saving money, but I was also really good at finding a way to spend that saved money.

Needless to say, if there were a fast track to retiring young, I sure as hell wasn’t on it. But, I followed these steps outlined below, and it changed everything for me. So, if you want to retire young, these ideas are worth your consideration.

1. Read This Book

Here’s where you should start. Read this book, it is a book that changed my life.

Now, quick disclaimer,  This book was no magic pill.  It didn’t make me richer over night. But, it did help me find riches (relatively speaking), and it’s been helping me become richer year over year.

So, what was the title of this book?

It was called ‘Rich Dad Poor Dad’.

Now, I know this book has been around for a long time, since 1997 to be exact.  In fact, as I write this, I keep thinking to myself, “man this is old-hat. Why are you writing about this? Everyone has already heard of this book.”

But, the truth is, I feel compelled to write about it because maybe you’ve never read it.  Or, maybe you’ve heard of it, but have yet to crack it open.  Or, maybe you still think like I thought before I read the book.

Maybe you think money is bad, or that becoming rich and retiring early is not possible for you.  Or, maybe you just need a good ole kick in the financial pants like I did back then, and you’re waiting for someone to give you that kick.  Maybe this is your kick…so, here we are.

2. Allow Money to Motivate You

Know this, before I read this book, my mind wasn’t open, especially when it came to money. Sure, I was a “open-minded thinker” when it came to philosophy, politics, and all those other time-wasting topics that typically make people feel more miserable and more powerless the more they read of it. 

But, when it came to money and getting rich, I was clueless.

On top of that, before I read this book, I wasn’t a very motivated person.  I mean, I was motivated enough to drag my butt out of bed and drive to work every morning, but I wasn’t on fire for life (for at least four days out of the week…Monday – Thursday), and I wasn’t on fire for my future.

But then… then I read this book and it did something to me.  It transformed my mindset.  It helped me open my eyes to the possibilities of living a life of abundance.  It opened my eyes to the prospect of retiring young and retiring rich.  In short, it lit a fire under my ass.

And I am sure it can do the same for you.

How do I know?  Well, I’ve learned over the years that when we have an exciting vision for our future, amazing things start to happen.

That’s why I always preach about having compelling goals as your best source of motivation. And it’s the reason I created the Strive Journal; to get that compelling goal of yours in front of you, every… single….day. 

Why? Because that’s how winning is done.

Set some money goals (get rid of debt, net worth, etc..) and let them pull you!

3. Shift Your Mindset

With that being said, there are countless other books out there that can help you understand the money-game or give you advice that can help you retire early, but if you come from humble beginnings like me, you’re going to need a book that can shift your financial mindset. And no doubt about it, “Rich Dad Poor Dad” will do the trick.

Once you allow this book to shift your mindset, you’ll likely want to read other financial books. So, if this book piques your financial curiosity like I think it will, here is a great set of follow up books you can also read to improve your financial IQ.

As they say…”If you want to earn more, you have to learn more.”

Now, I don’t want to leave you with… “Okay, now just go read this book and this is how you will retire early”, so I am going to give you a few insights you can start applying to your life today…book or no book.

Here is one of the biggest takeaways I got from the book that you can start leveraging today if you’re not already doing so.  You ready for it?

Here it is, you can retire early and you can retire rich, if you focus on the accumulation of assets over liabilities, and income over expenses.

What do I mean by this?  Let me give you a little helpful break down.

4. Prioritize Assets Over Liabilities

What are assets?  Well, as a very simple definition, an asset is anything that grows in value over time.  For instance, and asset is a piece of property like real estate, a business, stocks (shares of ownership of a business), precious metals, intellectual property, or pretty much any item that holds value or becomes more valuable over time.

Whereas liabilities, especially as voiced in the book, are things that you owe money on.  This could be credit card debt, your mortgage, car loan, your student loan, etc.  Basically, it’s anything you are obligated to pay for and keep paying for.

So, the book does a great job pinpointing exactly how the rich think, by showing us what we should be accumulating more of (assets).  I know this may seem like common sense.  But hey, common sense isn’t so common.

Truth is, most people go about their days growing their liabilities to keep up with their neighbors, instead of growing their assets to keep up with their vision for their future.

Unfortunately, far too many people float along through life, living in a form of fairy tale, thinking someone somewhere down the road is going to take care of everything for them.

But, the reality of it, is that no one is going to save you.  No one is coming, there are no heroes when it comes to your own financial future.   The government, social security, or that social revolution isn’t going to bail you out. So, you’ll have to save yourself.  You have to become your own hero.

And the best way to become your own hero is to take control of your own financial future.  And you start taking control of your financial future when you begin to understand the difference between assets and liabilities, and then choose every day to focus on growing your assets and reducing your liabilities.

Become obsessed with this idea.  Start thinking “assets over liabilities…assets over liabilities” every time you’re about spend a dollar.  This is the mindset needed to create an abundant future for yourself.  This is the mindset you need if you want to get rich.

It’s not sexy, it’s not pretty, it’s not convenient…it’s just the truth.

But, thinking this way alone is not enough, you’ll also have to master this battle too…

5. Focus on Income Over Expenses

We all know what income is and what expenses are.  But what this book does a good job of doing, is hammering over and over into our minds WHY we need to gain control over our expenses.   The reason?  So you have more income left over at the end of the month, extra income that can then be invested into assets.  Not liabilities, not in things you don’t need, not into fluff and excess stuff, into assets.

The crazy thing about a lot people, is they think they have to spend every last dollar they make.  Just as soon as these people get their paychecks they find a way to burn through it.

When I see people do this, I shake my head and think to myself, “Come on…. do you really want to be stuck working a job or operating a business your whole life?!”

Please, pretty please…don’t be “that” person.

Get your expenses down to as low as possible.  By doing this, you increase the amount of income you have left over at the end of the month.  Then you can take that extra income and invest it in your future by investing in assets.  Assets like real estate, investment funds, or a business.

Learn how to master your expenses and invest your income wisely.  It’s a simple formula.  And if you don’t want to be a slave to your circumstances FOREVER, it’s a formula worth following.

Now, many people might say, “well I don’t make enough money” or “If I follow this plan I won’t have much left to live off of” or… blah blah blah.  Most people make excuses, that’s why most people don’t retire young and very few retire rich.  That’s why most people have to wait till they’re 65 before they can scratch their own itch.

But you’re not most people.

We all got to start being smarter with our money sometime.

Why not make that sometime now?

6. Start Tracking Your Money

One of the best things I ever did for growing my wealth was a two-part process; kill my excess spending and siphon every extra dollar into investments.   The second best thing I ever did, was to begin tracking my wealth on a dry-erase board.  Sure, I could have tracked it on a spreadsheet or some new fancy financial app, but putting those numbers on a physical board where I could see them every single day, made my assets and net-worth feel more tangible… more real.  Not sure why, it just did, and that feeling kept me motivated to keep striving to grow my wealth.  Still does.

Truly, there is something powerful about knowing where you stand financially, and being able to visibly see your assets grow month over month.  Here’s how you can do the same thing.  Go out and get you a 17″ x 23″ dry-erase board, something like this…..

Then on that dry-erase board, draw a cross through it, creating four equal quadrants.  On the top left quadrant, list out all your assets and total them.  Then, on the upper right quadrant, list out all your liabilities and total them.

On the bottom left quadrant, graph the growth of your assets month over month (doing this tracks your growth and is very motivating).  Similarly, use the right bottom quadrant to graph the reduction of your liabilities month over month (again, the biggest benefit of doing this is for moral purposes…because observing your own progress will help you keep your spirits up).

Then, draw a small rectangle in the center of all four quadrants, in this rectangle subtract your liabilities from your assets, and voila, you have your net-worth.  You still with me?

If not, below is an image of what I am describing.  It’s an exact replica of the system I use on my own dry-erase board (figures are for educational purposes only).  As they say, there are a hundred ways to skin a cat, so feel free to use these ideas or create your own little something if that works best for you.

Retire Young Retire Rich

7. Determine How Much You Need to Retire Early

Now, one of the most crucial aspects related to retiring early, is knowing exactly how much you need to retire. You can have the best money management habits, but if you never take the time to determine exactly how much you need to call it quits on the 9-to-5, you never do so.

Determine Your FI Number

With that being said, make sure you discover exactly how much money you’d like to have coming to you every month once you retire. A good place to start, is to assess how much you need bare minimum for all your necessary expenses, and then to add any other expenses that you are sure you will want to enjoy while you are retired.

Once you have that number, you essentially have your financial independence number (also widely known as your FI number). This number is ultimately how much money you need to cover your expenses and wants every month.

From this point forward you’ll be set to start working towards creating cash flow and revenue that would help you meet this financial goal. For example, if you estimate your future monthly expenses to be around $3,750 (equivalent to $45,000 per year), then you can work towards anyone of these goals to get to your intended outcome:

  • Invest $800,000 in an investment yielding around 5.5% annually = $45,000 per year
  • Invest $1,000,0000 in an investment yielding 4.5% annually = 45,000 per year
  • Build a side-hustle that pays you passive income = $3,750 per month
  • Invest in 7 or 8 $250,000 multi-unit properties cash flowing around $500 each = $45,000
  • Any combination of the above in differing amount to help you get to your number.

Obviously, these are just hypothetical numbers above, but they are doable if your FI number was a modest $45,000 per year. Now, if you wanted or needed more money each month, then you FI number as they call it, would have to be adjusted up.

The great news is, once your inflow from investments, side-hustles, etc.. match your FI number, you can, if you wish to… retire young!

How about that!

Conclusion

And that’s that.  Start actively tracking and measuring your assets, and financially speaking…you’ll put yourself leagues above your peers.  On top of that, you’ll be in a much better position for retiring young…and maybe even rich.

But most importantly, discover exactly how much money you need to either stash away, or how much money you’ll need a business to produce for you, so can live off of the income those investments produce for you.

What it all comes down to in the end my friend, is awareness and discipline.  Be aware of what your future will look like if you fail to be smart with your money now. And be aware of the money milestone you’ll need to reach to retire young. Then get disciplined enough to do what you must to turn that goal into reality. 

Without a doubt, if you do these things outlined on this post, you’ll be able to create the future you want for yourself and retire sooner, rather than later.

Till next time,

STRIVE

High effort, self-discipline, and fearless action are “my things”.  If you could use a bit more of these life-enhancing attributes, or if you want to be nudged from time to time to start taking action on your goals and dreams, follow me on Twitter.

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