Retire Early, Live Well: Your Guide To Financial Freedom
On FIRE: Achieve Financial Independence (even with kids) Take Early Retirement Using this Money Secret By: Tom Cromwell
Hear it Here - https://bit.ly/OnFireCromwell
https://www.amazon.com/dp/B08WTBPTHT
Are you afraid you will have to work until you drop? Are you fed up with your job, the 9-5, and want to escape? Can’t work out how to square that circle? Find out how to retire early without a six-figure income even if you have children.
With a life expectancy of 79, the average American can expect to retire at 64 with a net worth of $224,000, leaving them with less than $15,000 a year to live on. If you have different goals and aspirations then you are not alone. F.I.R.E.—Financial Independence Retire Early: the key elements are building a portfolio of investments that will provide an alternative income that will replace your income from salaried employment. There are many blogs and books written by well-paid graduates recounting their experience of how they managed to retire at 38 without having kids. Achieving this when you are a DINK (dual income, no kids) is a breeze. But what about you—the average Joe and Joanne? Find out how someone with a family and who is not on a six-figure salary can aspire to achieve financial independence. I cannot promise you will be able to retire at forty, or even fifty, but I can give you a real road map that will enable you to achieve early retirement.
In this audiobook, you will discover:
A portfolio secret that has consistently beaten the market since 1995
Why you may not need as much as you think to retire
How you can retire as a millionaire
How to avoid massive losses in the stock market
The secret of investing like Warren Buffett
Why you need to pay yourself first.
Why some people almost always make money in the stock market
I retired early to live off my dividend income, sent two kids to college, and I am not special.
#AmericanDream #BobClyatt #JamesTruslowAdams #PaulTerhorst #Retirement #Terhorst #WorkLessLiveMore #RussellNewton #NewtonMG #OnFIRE #RetireEarly #LiveWell #YourGuideToFinancialFreedom
Transcript
On FIRE:
Speaker:Achieve Financial Independence (even with kids)
Speaker:Take Early Retirement Using this Money Secret Written by
Speaker:Tom Cromwell , narrated by russell newton.
Speaker:What Does Your American Dream Look Like?|.
Speaker:There are probably millions of answers to that question,
Speaker:many of them being a variant of the idealized classic of a self-sufficient life.
Speaker:For James Truslow Adams,
Speaker:the American Dream is the belief that “life should be better and richer and
Speaker:fuller for everyone,
Speaker:with opportunity for each according to ability or achievement."
Speaker:Back in the 1800s,
Speaker:that might have meant having the opportunity to start a smallholding to live
Speaker:off the land in Libertarian tradition,
Speaker:but modern Americans dream more frequently about a life of comfort and
Speaker:consumerism.
Speaker:When we dedicate so much of our lives to working,
Speaker:it often seems like the comfort (and fun)
Speaker:won’t begin until we can leave our work life behind and enter
Speaker:retirement—but even then,
Speaker:it’s not guaranteed.
Speaker:Too many Americans find themselves with far too little in savings to live in
Speaker:comfort without the crutch of regular income,
Speaker:and that’s reflected by the 63% of Americans who don’t think their savings
Speaker:are on track.
Speaker:If you find yourself in the same camp as that 63% of Americans,
Speaker:then you might be dismissive of the idea that you could retire as a millionaire.
Speaker:I cannot promise you that you will,
Speaker:but you certainly can.
Speaker:People often look to the ‘millionaire club’ as hyper exclusive,
Speaker:but that’s just not accurate.
Speaker:If you’re earning a decent average salary,
Speaker:or if you have the significant financial commitment that comes with having
Speaker:children,
Speaker:then it will no doubt be harder.
Speaker:But you can do it,
Speaker:and you already have all the tools you’ll need—a solid work ethic,
Speaker:self- restraint,
Speaker:and a whole truckload of vision.
Speaker:You see,
Speaker:the secret to accumulating a million dollars isn’t a secret after all.
Speaker:Through a combination of frugal living,
Speaker:saving,
Speaker:and investing,
Speaker:you could very well build up a seven-figure nest egg by the time you retire.
Speaker:We’re not looking at the 1% here,
Speaker:but instead the nearly 7% of U. S. households that can claim to have hit the
Speaker:mark.
Speaker:There will be sacrifices along the way,
Speaker:and you’ll need to make difficult choices.
Speaker:This is especially true if you want (or already have)
Speaker:children.
Speaker:Raising a family is rewarding,
Speaker:but there are so many extra expenses that come with it.
Speaker:You need to be realistic about what you can achieve in a relatively short time
Speaker:when you also have to think about putting dinner on the table and keeping a
Speaker:roof over everyone’s heads.
Speaker:It’s much easier for people who earn six figures or who don’t have children
Speaker:to save and invest money—but the millionaire club is not reserved for them
Speaker:alone.
Speaker:What I hope you’ll see is that you can join them and become a millionaire
Speaker:too,
Speaker:but you’ll need to start now.
Speaker:As I said,
Speaker:the tools that you need to save and invest effectively are right in front of
Speaker:you.
Speaker:Pick them up and get to work.
Speaker:How To Retire A Millionaire.
Speaker:You don’t need to be a millionaire to retire;
Speaker:indeed,
Speaker:most retirees aren’t.
Speaker:The thing about most retirees,
Speaker:though,
Speaker:is that they’re in their late sixties and don’t need to stretch out their
Speaker:financial stockpiles over many decades.
Speaker:If you retire in your mid-fifties (instead of 67),
Speaker:your retirement funds need to last twice as long.
Speaker:As it happens,
Speaker:even those who follow a fairly traditional path to retirement frequently find
Speaker:themselves short on cash—and that’s without wanting to retire early.
Speaker:A study conducted by the Transamerica Center for Retirement Studies showed that
Speaker:only 47% of retired Americans believe that they have enough money to last them
Speaker:for the rest of their lives.
Speaker:That’s a pretty troubling thought,
Speaker:and I defy anyone to find somebody who wants to grow old with money problems
Speaker:weighing on their mind.
Speaker:It strikes me that people underestimate just how much money they need and how
Speaker:long they will live.
Speaker:People have a natural fear of dying earlier than is statistically the case,
Speaker:so they don’t pace their spending appropriately.
Speaker:A medical emergency or a few significant purchases can rapidly eat away at
Speaker:small retirement funds.
Speaker:You can’t assume you will die at 79.
Speaker:How will you feel as that approaches and you find your funds dwindling—just
Speaker:when you are most vulnerable?
Speaker:To cut to the chase,
Speaker:the key to all of this is time.
Speaker:The earlier you want to retire,
Speaker:the more money you’ll need to accumulate.
Speaker:The earlier you start working towards your financial goals,
Speaker:the easier you will be able to acquire and accumulate the wealth you seek.
Speaker:If you’re saving $500 per month,
Speaker:you could be a millionaire in 33 years’ time.
Speaker:This is obviously a far more acceptable time horizon to somebody in their
Speaker:twenties who can wait 33 years,
Speaker:but if you’ve just hit 50,
Speaker:you’d probably prefer to only have an 11-year waiting time to reach the
Speaker:seven-figure mark—even if that does mean stashing $60,000 each year.
Speaker:In a nutshell,
Speaker:the sooner you want to reach your goal,
Speaker:the more you’ll have to commit.
Speaker:To give a sense of how (and when)
Speaker:you could retire a millionaire,
Speaker:I’ve set out the figures in a grid below.
Speaker:Here you’ll find out at what age you can become a millionaire based on your
Speaker:monthly savings and your age.
Speaker:For the sake of argument,
Speaker:I’ve assumed that you’re starting from scratch with $0 to your name,
Speaker:with a (modest)
Speaker:9% annual return on your investments.
Speaker:We’ll get to how you can achieve higher returns in good time,
Speaker:but for now,
Speaker:this gives a good indication of what it’ll take for you to reach this rounded
Speaker:goal.
Speaker:Not many people are going to be able to save $2,000 per month,
Speaker:but if you can save even $1,000 per month,
Speaker:then you can see that by starting early enough,
Speaker:you can retire a millionaire by 48 (assuming modestly good returns).
Speaker:However,
Speaker:too many people are leaving it too late to start investing for retirement,
Speaker:and that’s a problem.
Speaker:To avoid becoming part of that statistic,
Speaker:you need to start saving and investing now because the sooner you start,
Speaker:the easier your path to wealth and security will be.
Speaker:When Can You Retire?
Speaker:The truth about F. I. R. E. is that you don’t necessarily Need a million
Speaker:dollars to retire.
Speaker:It’s safe to say that you could probably eke out a comfortable if basic life
Speaker:on less than that—no matter what age you want to retire at—but it naturally
Speaker:follows that the earlier you retire the more money you’re going to need to
Speaker:carry you through life.
Speaker:Giving up the relative comfort and security of a regular paycheck is not
Speaker:something to take lightly,
Speaker:and likewise deciding to retire should not be a spur of the moment decision
Speaker:(unless you win the lottery or come into some serious wealth from a long-lost
Speaker:aunt).
Speaker:If you want to retire early (and for those who follow the F. I. R. E. movement
Speaker:religiously,
Speaker:the goal is often to retire by 40 or around there),
Speaker:you’re going to need to exercise some seriously proficient financial
Speaker:management.
Speaker:People often imagine a wealthy retirement without taking any action to achieve
Speaker:it.
Speaker:They put off starting a 401(k)
Speaker:account,
Speaker:they don’t make investments,
Speaker:and they save these things as something to do “when I have more money."
Speaker:The unfortunate truth is,
Speaker:however,
Speaker:that without positive and sustained action,
Speaker:you will never “have more money,” and will have harmed your chances of
Speaker:retiring in relative comfort let alone riches.
Speaker:There are lots of factors to consider when deciding whether you can retire
Speaker:early,
Speaker:but it all ultimately boils down to two questions - What Do You Want Your
Speaker:Retirement To Look Like?
Speaker:And How much money will you need to get there?
Speaker:Naturally,
Speaker:the first step to take is deciding what you want from life and retirement.
Speaker:Focusing on finances is all well and good,
Speaker:but if you predicate your decision to retire on having a certain amount of
Speaker:financial firepower,
Speaker:your retirement ‘figure’ should be grounded in the reality of how you want
Speaker:to live.
Speaker:Retirement doesn’t have to be all golf courses and bridge afternoons (unless
Speaker:that’s what you want)
Speaker:and charting a course for your future will help you navigate the route in the
Speaker:present.
Speaker:To followers of the F. I. R. E. movement,
Speaker:deciding how much money retirement will cost is an essential step as this
Speaker:figure will help them to determine when they can hang up their work boots.
Speaker:Summed up,
Speaker:their theory is that you should have enough money upon retirement to meet your
Speaker:regular expenditure.
Speaker:This entails not only accumulating a serious amount of money at an early stage
Speaker:but also requires those practicing the theory to plot out and stick to a
Speaker:meticulous budget that ensures their money goes the distance into later life.
Speaker:By this logic,
Speaker:how much you need to save for retirement is highly dependent on your
Speaker:circumstances.
Speaker:Of course,
Speaker:it always helps to have more,
Speaker:but perhaps the most grounded way of approaching this is to take a calculated
Speaker:look at how much it costs for you to sustain yourself and consider how much
Speaker:money you would need to live in this way for ten,
Speaker:twenty,
Speaker:or thirty years.
Speaker:As you’ll now already know,
Speaker:one of the most significant factors influencing when and how much you’ll need
Speaker:to take into retirement is time.
Speaker:How old you are,
Speaker:along with when you want to quit working will determine how long you have to
Speaker:accumulate assets and savings.
Speaker:It’s also the case that the earlier you retire,
Speaker:the more money you’ll need to support yourself through a period that’s
Speaker:usually limited to the final decade of a person’s life.
Speaker:Nobody can tell you the exact amount of money you need to retire comfortably,
Speaker:and this is what makes it so important to define what you want your retirement
Speaker:to look like.
Speaker:Even with a residual income,
Speaker:leaving the working world won’t suddenly make the cost of living irrelevant
Speaker:to you and the chances are that you’ll need more money to pay for things like
Speaker:healthcare than you did during your youth.
Speaker:Suppose you find it too difficult to set an exact figure and budget your life
Speaker:down to the penny for the next few decades.
Speaker:Instead,
Speaker:aim to have enough income to pay living expenses for the rest of your life
Speaker:without having to resort to employment or a dependency on other people.
Speaker:In other words,
Speaker:you should be aiming for financial independence.
Speaker:Financial independence is portrayed as something you achieve when you get rich,
Speaker:but this simply isn’t the case.
Speaker:There are plenty of people living modestly who are independent of the need for
Speaker:gainful employment or the support of others.
Speaker:For me,
Speaker:financial independence goes beyond just having enough money to carry you
Speaker:through the rest of your days.
Speaker:Of course,
Speaker:that’s the practical side of things,
Speaker:but it’s also about freedom—the chance to do what you want,
Speaker:when you want,
Speaker:without having to worry about the rat race or where your next meal is coming
Speaker:from.
Speaker:To my mind,
Speaker:that’s better than plain old retirement—and it could come a lot earlier too.
Speaker:If your passions can generate some form of income,
Speaker:you can fund your lifestyle with a combination of investing and doing work that
Speaker:you love.
Speaker:When you wake up each morning,
Speaker:pull on your work clothes and start the commute,
Speaker:are you spending your time how you’d like?
Speaker:Is your working schedule flexible enough to allow you some precious family
Speaker:time,
Speaker:or to take a trip once every so often?
Speaker:If the answer to these questions is no,
Speaker:it isn’t too late.
Speaker:You can achieve financial independence and all the trappings that go with it,
Speaker:but you need to start planning your life and finances sooner rather than later.
Speaker:The key thing to remember is that while financial independence offers an
Speaker:alternative to traditional retirement,
Speaker:it isn’t any easier to put into action.
Speaker:Whatever it is you want to do with your retirement,
Speaker:it’s important to taper your expectations.
Speaker:This is especially true if you have children and are earning a reasonably
Speaker:average salary.
Speaker:Perhaps the most significant barrier to successfully meeting retirement goals
Speaker:is that wannabe retirees move the goalposts as they go.
Speaker:By this,
Speaker:I mean they let their spending get ahead of them and lose sight of their goals.
Speaker:As they start to make more money,
Speaker:they feel that they should be incrementally increasing their standard of living
Speaker:instead of putting the extra money towards their original goals.
Speaker:I’ve known people who got a pay raise and started taking a series of
Speaker:elaborate and exuberant holidays to celebrate—which of course,
Speaker:became more of an annual tradition than a one-off thing.
Speaker:This meant that rather than putting their extra income to work for them,
Speaker:they were spending it.
Speaker:To those in the know,
Speaker:this is called “lifestyle creep,” but in layman’s terms,
Speaker:it’s the practice of spending more money as your income (or savings)
Speaker:goes up.
Speaker:It’s a good thing if you want to live a luxury lifestyle,
Speaker:but it’s dangerous if you want to make your money last.
Speaker:This is all the more important if you have a lower income because it’s hard
Speaker:to make the jump from that position to a wealthy later life.
Speaker:It’s essential to recognize that financial independence does not necessarily
Speaker:equate to riches,
Speaker:and a dose of realism about how you can realistically afford to live your life
Speaker:is always healthy.
Speaker:Many early retirement plans have been ruined by a slow yet constant growth in
Speaker:living standards— which bring with them more expensive lifestyle choices.
Speaker:It’s buying that flashy car,
Speaker:climbing the property ladder,
Speaker:and going on ever more exotic holidays in that pointless and harmful game of
Speaker:keeping up with the Joneses next door.
Speaker:The “I deserve it because I worked hard” mindset will keep you in debt that
Speaker:grows with every passing year— pushing you further and further away from
Speaker:financial independence.
Speaker:If you allow lifestyle creep to work its way into your finances,
Speaker:you’ll get trapped.
Speaker:Remember,
Speaker:the fancy cars,
Speaker:the big house and the frequent holidays cost money—which could keep you
Speaker:working in a job that you don’t want.
Speaker:This is especially true if you’re paying for all of this on credit,
Speaker:leaving you with an even bigger bill and not much actual substance to justify
Speaker:it.
Speaker:If you’re not in debt,
Speaker:don’t be tempted by consumer credit—and if you are,
Speaker:work damn hard to get out of it.
Speaker:Your (early)
Speaker:retirement depends on it.
Speaker:Money frittered away in the present is gone,
Speaker:but money invested now could be worth many times more in 20 years.
Speaker:When that hits home,
Speaker:and you get the financial independence bug,
Speaker:you’ll never look at spending in the same way again.
Speaker:Planning Your Retirement.
Speaker:Retirement is not binary—even though it can seem like it when you look at the
Speaker:traditional way of doing things.
Speaker:For most Americans,
Speaker:retirement is like hitting a switch that sees you transition from the world of
Speaker:work into a slower-paced lifestyle.
Speaker:The thing is,
Speaker:no rulebook dictates how retirement should look.
Speaker:There are many permutations of the status - what one person might consider a
Speaker:full-on working week might look like a laid-back part-time affair to another.
Speaker:I can’t describe every possible path through retirement as that would fill
Speaker:the pages of War and Peace many times over,
Speaker:but I think it’s useful to get an appreciation of the different approaches
Speaker:commonly taken.
Speaker:Traditional retirement sees people work hard for around forty years before
Speaker:enjoying the last few decades of their life by living off their savings,
Speaker:pension,
Speaker:and maybe even some government support.
Speaker:The vast majority of people will be familiar with this approach,
Speaker:and it’s probably the route taken by your parents and grandparents.
Speaker:Now there’s nothing wrong with living your life to the normal rhythm,
Speaker:but naturally,
Speaker:the question many people ask is “Why should we wait?"
Speaker:If you want to enjoy your life in the here and now without having to stick it
Speaker:out at work when you’re at your most mobile and energetic,
Speaker:early retirement could offer a way out.
Speaker:You might come across this as people decide to throw in the work towel at age
Speaker:fifty-five or even during their forties.
Speaker:It might not sound all that different from a traditional retirement,
Speaker:but to forgo your primary income for an extra decade or two before most people
Speaker:leave the workplace means making sacrifices.
Speaker:Early retirees keep their costs low and drive their income higher—and the
Speaker:earlier they want to retire,
Speaker:the harder they need to work to get their finances in order.
Speaker:These routes are quite different,
Speaker:but they have one central point of commonality—that they lead to permanent
Speaker:retirement.
Speaker:This is a retirement in which you don’t go back to work,
Speaker:start a side-hustle,
Speaker:or pursue a more relaxed course of employment.
Speaker:It’s easy to think that these are your only options,
Speaker:too,
Speaker:but they aren’t.
Speaker:Take,
Speaker:for instance,
Speaker:the theory of ‘temporary retirement’ proposed by Paul Terhorst in his book
Speaker:Cashing in on the American Dream.
Speaker:As an alternative to early retirement,
Speaker:Terhorst suggested that people use their ‘middle years’ during their
Speaker:thirties to fifties to enjoy life.
Speaker:Without a 9–5,
Speaker:these people can raise a family and enjoy time with them,
Speaker:they can travel,
Speaker:and have the choice to go back to work at any point.
Speaker:The selling point here is that you get to enjoy the money you’ve earned and
Speaker:the time you’ve freed up when you’re still able to be active and when your
Speaker:physical and mental capacities are pretty high.
Speaker:To my mind,
Speaker:this is something of an extended sabbatical,
Speaker:and there’s nothing wrong with that,
Speaker:but it does mean that if you run out of money,
Speaker:you’ll have to re-enter the world of work.
Speaker:The trouble is,
Speaker:the older you are,
Speaker:the harder it is to keep skills current and to find and engage in employment.
Speaker:Perhaps the best alternative is another middle ground,
Speaker:that of semi-retirement.
Speaker:Popularized by Bob Clyatt in his 2005 book Work Less,
Speaker:Live More,
Speaker:semi-retirement is all about finding a pace of life that suits you.
Speaker:You can get the income benefits of work,
Speaker:but with the free time of retirement.
Speaker:This might mean working in a reduced capacity,
Speaker:changing jobs to something that offers you a sense of satisfaction,
Speaker:or supplementing your investment income with a care-free,
Speaker:low-stress job.
Speaker:Either way,
Speaker:you’ll be able to deviate from the conventional way of doing things without
Speaker:the financial burden of leaving the working world altogether.
Speaker:You can approach retirement in any way you choose.
Speaker:The formats I’ve set out are little more than theories,
Speaker:and there is nothing to stop you from forging your way forward.
Speaker:Retirement is all about having choices and the flexibility to do more or less
Speaker:as you please.
Speaker:One thing’s for certain though,
Speaker:and that’s that you should only look to retire for the right reasons.
Speaker:When you’re working in a dead-end job,
Speaker:or under a manager that you just can’t get along with,
Speaker:or if you desperately need a break,
Speaker:retirement probably isn’t the answer.
Speaker:There are other solutions like finding a new job or taking a sabbatical to
Speaker:remedy these issues without cutting out your direct source of income.
Speaker:Think carefully about your motivations for seeking out retirement,
Speaker:whether early or otherwise,
Speaker:and only act on them if you’re doing it for yourself and not to escape
Speaker:something else.
Speaker:The Path To Retirement.
Speaker:With goals and aspirations for retirement in mind,
Speaker:you’ll probably be eager to start making some headway.
Speaker:Although it’s easy to categorize these comments as purely retirement advice,
Speaker:you need to remember that we’re talking about your future here—in the very
Speaker:broadest sense.
Speaker:This isn’t just about what your final years will look like,
Speaker:but also about how you’ll get to them,
Speaker:what you’ll be able to enjoy in the meantime,
Speaker:and the hard work you’ll need to put in.
Speaker:Despite the grand scale of the task ahead,
Speaker:you don’t need a plan that maps out every single action you’ll take—and
Speaker:you needn’t even account for each dollar you earn or spend.
Speaker:Living frugally and other such lifestyle factors are undoubtedly a vital part
Speaker:of achieving financial independence,
Speaker:but there are also some firmer concepts that you’ll need to keep close to
Speaker:your heart.
Speaker:These are the tools that will help you retire early,
Speaker:leave work with a million bucks,
Speaker:or both.
Speaker:Debt – Don’T Do It.
Speaker:You might know what it takes to accumulate a million dollars,
Speaker:but money in the bank is not how millionaires are made.
Speaker:That coveted financial status is about net worth,
Speaker:a goal that’s thankfully easier to reach than just having $1 million of
Speaker:liquid cash sitting in a checking account.
Speaker:You can calculate how much you’re worth by subtracting your debt from all
Speaker:your assets—and it’s no secret that the less debt you have the better.
Speaker:Wealthy people generally take an identical approach to debt—namely that it
Speaker:shouldn’t be messed with.
Speaker:You might dismiss their argument that they don’t need to get into debt as
Speaker:they can just pay for things outright.
Speaker:However,
Speaker:it can also be refuted since they got rich somehow,
Speaker:which can probably be partially attributed to an aversion to debt.
Speaker:In a world where opportunities to get into consumer debt are everywhere,
Speaker:it’s much harder to altogether avoid debt than it perhaps might have been
Speaker:when your only reliable source of borrowing was from the local branch manager.
Speaker:You no longer need to look somebody in the eye to borrow money,
Speaker:and there are services that allow you to spread the cost of everything from
Speaker:clothes to white goods over an extended period whilst racking up additional
Speaker:charges in interest payments and fees.
Speaker:With so much credit on offer,
Speaker:it’s no surprise that many people fall into the mindset that it’s okay to
Speaker:borrow liberally.
Speaker:With the nicest things within reach and only a credit agreement checkbox away,
Speaker:it’s easy to lull yourself into a false sense of security but the reality is
Speaker:that few people are using debt wisely.
Speaker:Before I can give any advice on the subject of debt in the context of
Speaker:retirement,
Speaker:it’s important to understand that debt is a more complex topic than you could
Speaker:ever imagine.
Speaker:It’s so often the case that financial advisers and advice columns divide
Speaker:borrowing into ‘good’ debt—used to pay for things that help to create
Speaker:wealth such as a student or business loan—and ‘bad’ debt—used to
Speaker:describe things like credit cards and other consumer liabilities.
Speaker:This binary classification just isn’t helpful,
Speaker:however,
Speaker:since even so-called ‘good’ debt is only useful in certain circumstances.
Speaker:A college degree is often billed as a solid gold promise of higher future
Speaker:earnings and a bright professional future,
Speaker:but there is no actual guarantee that you’ll earn more money with a degree
Speaker:than without one.
Speaker:Some reports even suggest that almost half of college graduates take positions
Speaker:out of school that do not require a degree,
Speaker:but the scarier figure is the 20% who are still in the same position a decade
Speaker:later.
Speaker:For even unnerving reading,
Speaker:you need only to look at the millions of borrowers who lost their homes to
Speaker:foreclosure during the subprime mortgage crisis that took place between 2007
Speaker:and 2010.
Speaker:As property prices went into freefall,
Speaker:the sting in the tail of adjustable-rate mortgages came into its own and
Speaker:claimed the life savings of far too many Americans.
Speaker:In short,
Speaker:their coveted property ‘investment’—the one they put so much on the line
Speaker:for in terms of mortgage borrowing—was gone.
Speaker:This shows that success is not assured,
Speaker:and that debt should be used very sparingly and only when you have a plan for
Speaker:it.
Speaker:Of course,
Speaker:it’s impossible for a matriculating freshman to know what their job prospects
Speaker:will look like at the point of graduation,
Speaker:but actively limiting and reducing your debt while you’re in school can only
Speaker:be a good thing.
Speaker:The same is true of mortgage debt too—and any sensible adviser should really
Speaker:be telling you to find a payment level that works for you over the long-
Speaker:term—taking into account the possibility of redundancy,
Speaker:a larger family,
Speaker:and any other wealth- draining circumstances that might crop up to limit your
Speaker:future income.
Speaker:Overall,
Speaker:debt can never really be risk-free.
Speaker:Whatever it is you’re borrowing for,
Speaker:and however good it seems,
Speaker:you have to look critically at what you’re getting yourself into.
Speaker:Ask yourself whether the debt will pay you back more than what you put in.
Speaker:If,
Speaker:after factoring in the principal repayment,
Speaker:interest,
Speaker:and other potential uses of the money that you’ve forgone,
Speaker:you still end up with more than you would otherwise have had,
Speaker:your debt is probably worthwhile.
Speaker:Good debt will always do more for you than you do for it—and sticking to that
Speaker:mantra will help you to stay on track.
Speaker:If you do find yourself in debt,
Speaker:it’s important to acknowledge just how damaging your situation could be to
Speaker:any hopes of early retirement.
Speaker:Leaving active income behind will almost certainly be out of the question if
Speaker:you are struggling to beat down a high debt figure,
Speaker:and ongoing repayments may significantly limit the amount of residual and
Speaker:passive income that reaches your pocket to cover the costs of living.
Speaker:With these risks in mind,
Speaker:it’s necessary to consider how you can pave the way towards retirement by
Speaker:reducing your exposure to debt—both good and bad.
Speaker:If you’ve spent even a moment researching ways to deal with debt,
Speaker:you may well have come across what is known as the ‘debt snowball’ method.
Speaker:With a great many proponents,
Speaker:the debt snowball method is a debt reduction strategy that entails paying off
Speaker:debts in order from the smallest to the largest,
Speaker:with the repayment amounts for each rung of the ladder increasing as you pay
Speaker:off your smaller liabilities.
Speaker:It means making minimum payments for all of your debts except the smallest,
Speaker:towards which you pay as much as you possibly can.
Speaker:By repeating this process until all of your debts are settled,
Speaker:the method acts like a snowball as your repayment sums substantially increase
Speaker:as you eliminate each credit card debt,
Speaker:car loan or student finance liability like a snowball getting larger as it
Speaker:rolls down a hill.
Speaker:That’s great of course,
Speaker:but what if you want to pay off your debt even faster?
Speaker:If you want to retire early or achieve financial independence quickly,
Speaker:you’ll need something altogether more effective to haul yourself out of
Speaker:debt—and that’s where the ‘debt avalanche’ method comes into play.
Speaker:If the F. I. R. E. movement’s saving and investing strategies are extreme in
Speaker:scope and success,
Speaker:then the avalanche method is the debt repayment equivalent that’s used by the
Speaker:fiscally savvy to regain their feet and march onwards towards financial
Speaker:independence quickly.
Speaker:The debt avalanche approach requires you to make minimum monthly payments
Speaker:towards all of your debts (so far,
Speaker:so good)
Speaker:but then pay as much as you reasonably can towards the debt with the highest
Speaker:interest rate until it’s settled.
Speaker:Thereafter you keep this up but add the minimum payment from your most costly
Speaker:debt to the one with the next highest interest rate until all of your debt is
Speaker:gone.
Speaker:The beauty of this method is that you’re paying down your debt total just as
Speaker:you would with the snowball approach,
Speaker:but you’re also limiting the amount you pay in interest,
Speaker:meaning that you can save money while paying off debt.
Speaker:When you pay off debts using the avalanche method,
Speaker:you halt the growth of compound interest in its tracks but you can miss out on
Speaker:the psychological support of quick wins.
Speaker:Instead,
Speaker:it will give you a faster timeline towards the repayment of your debts.
Speaker:The Long View Of Wealth Building.
Speaker:Retirement plans should always incorporate timescales and withdrawal sums,
Speaker:but these are metrics by which you can measure the use of your money.
Speaker:You also need to work out how you’ll generate money to create a residual
Speaker:income that covers your living costs and allows you to achieve financial
Speaker:independence.
Speaker:More often than not,
Speaker:this will mean investing in stocks,
Speaker:bonds,
Speaker:funds,
Speaker:and other assets in the hope of securing an income stream.
Speaker:Saving alone won’t cut it and sticking to cash will see you lose money to
Speaker:inflation as you won’t be earning enough interest to cover the increasing
Speaker:cost of living.
Speaker:Investing,
Speaker:without equal,
Speaker:is the best and most consistent way to make money—but getting involved with
Speaker:investments means you’ll need to get comfortable with risk,
Speaker:which can be particularly hard for people who don’t have a lot of money to
Speaker:lose.
Speaker:Risk is synonymous with market volatility—the rise and fall (and deeper fall
Speaker:still)
Speaker:of the investment markets.
Speaker:As the measure of price change over time,
Speaker:the volatility of any given investment should be of particular interest to
Speaker:anybody who wants to generate wealth,
Speaker:and it’s important on two levels.
Speaker:Firstly,
Speaker:you should generally only involve yourself with investments that are within
Speaker:your level of risk tolerance.
Speaker:That is to say that regardless of how much you think you need for retirement,
Speaker:putting all of your money into a high risk,
Speaker:potentially high reward venture is not a good idea.
Speaker:That being said,
Speaker:risk is also an important indicator of an investment’s potential.
Speaker:More volatile investments are riskier because their prices are unstable,
Speaker:but they will generally also offer higher potential returns.
Speaker:It’s a balance that you need to tread carefully,
Speaker:and one that you’ll need to become familiar with if you’re to follow the F.
Speaker:I. R. E. route into later life.
Speaker:You can get a good feel for volatility by watching the markets after making
Speaker:your first investments.
Speaker:It can get stressful when the first market drop comes along,
Speaker:and your first instinct might be to cut your losses and sell—but remember
Speaker:that doing so will make your losses real.
Speaker:If you can tough it out and remain invested during the more difficult times,
Speaker:all you can expect to happen is the value of your portfolio falling.
Speaker:In the future,
Speaker:as the markets change and bounce back you could well see that figure climb up
Speaker:again,
Speaker:but not if you’ve already taken your money out and made a loss.
Speaker:This is why it’s so important to take a long view of wealth building.
Speaker:Market volatility is a common phenomenon,
Speaker:and if you’re investing money into any common assets you might be familiar
Speaker:with the phrase “capital at risk."
Speaker:Most investments can go either way and so the money you put into stocks,
Speaker:bonds and other assets isn’t totally secure.
Speaker:For some people,
Speaker:the way around this is to try to time the market.
Speaker:They think that they can guess when the market will turn—investing and
Speaker:withdrawing money accordingly in the hope that they do it at the opportune time.
Speaker:Unfortunately,
Speaker:this rarely works.
Speaker:Timing the market is incredibly difficult and very risky,
Speaker:with more skill required than you would need to reliably and discreetly count
Speaker:cards in a Vegas casino.
Speaker:Time in the market beats timing the market,
Speaker:whichever way you look at it.
Speaker:The alternative is to invest long term.
Speaker:When you’re in with an investment for the long term,
Speaker:short-term fluctuations present much less of an issue to you than would
Speaker:otherwise be the case.
Speaker:This is because there’s plenty of time for the market to correct itself and
Speaker:for your particular investments to bounce back potentially even higher than
Speaker:they were before.
Speaker:Simply put,
Speaker:the longer you invest for,
Speaker:the more likely it is that your assets will weather the storm of low market
Speaker:periods.
Speaker:To top this all off,
Speaker:the longer you remain invested,
Speaker:the more time your money has to grow if you’re practicing income reinvestment.
Speaker:By choosing to reinvest any dividends or profits generated by your portfolio,
Speaker:you can benefit from the power of compound returns which act like a
Speaker:snowball—growing in size as your returns get reinvested over time.
Speaker:As you continually invest your profits,
Speaker:you’ll be earning returns on interest which above all will help your
Speaker:investment to grow at a much faster rate.
Speaker:The more that is reinvested back into your portfolio,
Speaker:the greater chance you have of earning even greater sums in the future in a
Speaker:virtuous circle.
Speaker:This is something that you can’t hope to do in the short term,
Speaker:and it’s why long-term investing is a good idea whether you want to retire in
Speaker:the next five years or the next thirty.
Speaker:Look to the example of the S&P 500 stock index and you’ll see this in action.
Speaker:In the decade between January 2010 and January 2020,
Speaker:there were annualized returns of over 9 percent.
Speaker:This is pretty good on its own,
Speaker:but the picture looks even better when you look at the 11.5 percent annualized
Speaker:return over the same period for those who reinvested their dividend income.
Speaker:In short,
Speaker:invest for the long term and don’t miss out on the magic of compounding.
Speaker:Your kids’ college money is better off as a money maker than a stagnant pool
Speaker:of wealth,
Speaker:and you won’t have to worry about losing it all—provided that you do your
Speaker:research and keep your composure during periods of decline.
Speaker:Retirement Spending Unwrapped.
Speaker:Even once you hit retirement,
Speaker:the planning and discipline can’t stop if you want to continue being
Speaker:financially independent.
Speaker:With or without the F. I. R. E. movement,
Speaker:there are certain financial rules that just make plain sense when trying to
Speaker:make your money go as far as possible—two of those are the 25 times rule and
Speaker:the 4 percent rule.
Speaker:The 25 times rule is perhaps the easiest to figure out since it entails saving
Speaker:up 25 times your annual expenses (not your yearly income)
Speaker:to retire.
Speaker:This is the figure that some F. I. R. E. followers believe you’ll need to be
Speaker:considered as truly financially independent.
Speaker:Thinking about the lifestyle that you want for yourself,
Speaker:if your expenses are likely to be around the $40,000 per year mark,
Speaker:you’ll need to save $1,000,000 to retire according to this rule.
Speaker:However,
Speaker:if you can live frugally on $20,000 per year,
Speaker:you only need to acquire investments of $500,000.
Speaker:Once you’ve got your money,
Speaker:you’ll also need to work out the rate at which you can afford to spend it.
Speaker:Remember that the F. I. R. E. followers who abide by these rules leave the
Speaker:world of regular paychecks behind,
Speaker:so spending too quickly could deplete their coffers and leave them high and dry.
Speaker:Often attributed to three Trinity University Professors,
Speaker:the 4 percent rule is effectively a formula for withdrawing money during
Speaker:retirement without draining your reserves too quickly.
Speaker:The framework allows you to withdraw 4% of your retirement savings in the first
Speaker:year,
Speaker:with the same percentage of withdrawal in each subsequent year.
Speaker:The most observant readers might by now have pieced together that 4% equates to
Speaker:1/25—and so it’s easy to see how the two calculations interact to provide a
Speaker:rock-solid retirement formula.
Speaker:If nothing else,
Speaker:the 4 percent rule acts as a benchmark against which retirees can decide how
Speaker:much of their portfolio to withdraw on an annual basis to see them through
Speaker:retirement.
Speaker:By withdrawing a percentage of your portfolio’s total value instead of a flat
Speaker:figure,
Speaker:you can benefit from the reinvestment of your residual income which stretches
Speaker:out the money you have available.
Speaker:It also provides a hedge against inflation.
Speaker:The 4% rule assumes that historic returns on the S&P have averaged just around
Speaker:8% - 9%.
Speaker:If you assume you need to deduct historically average levels of inflation of
Speaker:around 2-3% from this return you are left with 5-6%.
Speaker:However,
Speaker:there are number of other factors such as market volatility (producing lower
Speaker:returns),
Speaker:plus the need to sell investments in falling markets,
Speaker:and a margin of safety that make 4% a realistic baseline The problem for those
Speaker:who wish to retire early,
Speaker:however,
Speaker:is that this rule does not reliably guarantee that your portfolio will last for
Speaker:the duration of your life after work.
Speaker:It also becomes fairly useless once you tick over the 701⁄2 mark,
Speaker:as U. S. tax law then requires you to take withdrawals from your IRAs.
Speaker:When other withdrawals start coming into play,
Speaker:continuing with such a formulaic approach to using your portfolio doesn’t
Speaker:only leave you at the mercy of inflation but could also open you up to
Speaker:increased tax liability.
Speaker:On the whole,
Speaker:the 4 percent rule is a reasonable place to start—but it doesn’t
Speaker:necessarily work for those who want to retire early.
Speaker:For one thing,
Speaker:the rule was modeled on a hypothetical portfolio that was split equally between
Speaker:stocks and bonds.
Speaker:In all likelihood,
Speaker:your own portfolio will be composed differently than that model,
Speaker:and your investments might also change throughout your lifetime meaning that
Speaker:the balance will shift.
Speaker:Perhaps most significantly,
Speaker:however,
Speaker:the 4 percent rule works to a 30-year time horizon.
Speaker:This means that the rule probably isn’t suitable for those who have already
Speaker:reached retirement and are aged over 65,
Speaker:but it also makes it potentially unsuitable for those who want to retire
Speaker:earlier than 50.
Speaker:Many adherents of F. I. R. E. that want to retire very early,
Speaker:in their thirties,
Speaker:use 3% as a prudent rate.
Speaker:I cannot state enough how important it is to manage the risk of running out of
Speaker:money when you want to retire early.
Speaker:And so even if 4 percent is your starting point,
Speaker:you should seek out a more bespoke solution that reflects your circumstances,
Speaker:the composition of your portfolio,
Speaker:and your definition of retirement.
Speaker:For example,
Speaker:I aim to live off the income generated from my portfolio without ever touching
Speaker:the capital.
Speaker:This means that I do not damage my long-term prospects if there is a market
Speaker:crash by eating into large parts of my portfolio to provide current income.
Speaker:This is a real danger to people who retire very early who are relying on a
Speaker:whole stock portfolio.
Speaker:For them taking out $30k or $40k following a crash such as in 2000–2002 (the
Speaker:market lost around 50% of value)
Speaker:would seriously dent their capital.
Speaker:These are the types of scenarios when the 4% rule fails to make the funds last.
Speaker:Make It Your Own.
Speaker:It’s not always easy to live life as an average American with dreams but also
Speaker:two kids and a dog,
Speaker:and there’s no getting away from the challenges you’ll face on your way to
Speaker:realize those.
Speaker:It can be done,
Speaker:though.
Speaker:With the right approach and dedication to your own cause,
Speaker:almost any financial hurdle can be crossed.
Speaker:In the rest of this book,
Speaker:we will be setting out to provide answers on how to realize those dreams and
Speaker:overcome those challenges.
Speaker:Chapter Summary And Conclusions.
Speaker:• You and everyone can retire a millionaire,but you may not need that much to
Speaker:do so.Start investing early to make the power of compounding work for you.
Speaker:• Decide what your retirement will look like?Will it be part-time or
Speaker:volunteering work?Maybe a frugal existence in a low-cost location filled with
Speaker:cheap outdoor pursuits more expensive hobbies and pass times.This determines
Speaker:how much money you will need.
Speaker:• How much do you need to retire?Conventionally in retirement,
Speaker:you need an income between half and a third of your working annual income.
Speaker:The F. I. R. E. movement usually considers that you should have 25x your
Speaker:annual expenditure as retirement pot.
Speaker:• How to get there - invest carefully and assiduously.
Speaker:In all cases,
Speaker:eschew consumer debt.
Speaker:• How can I make funds last through retirement?
Speaker:A withdrawal rate of 4% for people retiring in their late forties or fifties is
Speaker:likely to be prudent and protect you against inflation.
Speaker:This has been
Speaker:On FIRE:
Speaker:Achieve Financial Independence (even with kids) Take Early Retirement Using this Money Secret Written by
Speaker:Tom Cromwell , narrated by russell newton.
