There are two personalities that have been blogging and writing about a novel concept – extreme early retirement: Jacob Lund Fisker, who retired at the age of 33 (five years ago) and Mr. Money Mustache who retired at the age of 30, nine years ago.
Can you do it? Yes, but of course the devil is in the details.
It’s never too late to retire early.
First let’s discuss what retiring is to you and to most other people. For most of us, to retire is to leave your job or occupation; to not have to work anymore; and to live off your savings and passive income. So in order to retire extremely early you will must have saved enough money and set up enough passive income that will support a live style you budget for. The more frugal the lifestyle you set and the more money you save and the more passive income you set up, the earlier you can retire. Simple right?
Both visionaries suggest you do the following:
- Live as cheaply as possible
- Save two thirds of your income
- Invest that money for passive income and growth
Once the income from 3 exceeds the expenses 1, you can retire.
Remember, there are homeless people that are retired and there are people that are living in mansions on the beach that are still working. The trick is to find the point in between where you can be comfortable. In order to get to your retirement point you need to be frugal and save NOW while you are still working.
To live in a one bedroom apartment and invest all your money for fifteen years while your friends and cohorts are driving (and paying for) expensive cars, taking extreme vacations and living in big houses requires delaying of gratification for great satisfaction later. If you are one of the few that can delay gratification to reap big rewards later, then perhaps you too can experience the delayed pleasure of extreme early retirement while your associates are paying off their lavish lifestyles.
If you can have enough pleasure imagining the satisfaction you will have….ONE DAY IN THE FUTURE, and you can spit in the face of the adage: “DO IT” or “You only live once” or better yet: “Life is too short to eat desert last”. Then you may be a candidate for extreme early retirement.
Live as cheaply as possible
In order to save 75% of your income you may have to live small, with roommates or better – stay with your parents (see multigenerational living). But let’s say you are on a late start to an early retirement and the days of living with Mom and Dad are gone, that ship has sailed: Make the adjustments to downsizing now anyway, readjust your lifestyle and get into a super saving mode for as long as you can.
- Do not buy anything on credit – pay as you go
- Tear up all your credit cards
- Downsize everything
- Set up a plan – and stick to it.
You may not be able to save 75% but shoot for a goal that will make you reach for it, strain for it and make you proud. Try it for a year, then for two, and then perhaps you will have habitualized it and become so thrilled at seeing you’re a savings grow – that you continue on the path to an extreme early retirement.
Build Passive Income
Saving your money without making it grow will be a big mistake, and it would be impossible to reach your extreme early retirement goal without passive income. You are going to have to put that savings to work for you. But where?
Real Estate. My personal favorite investment – I like the asset growth as well as the income from wise real estate investments. For me it’s the ultimate “make money while you sleep” solution. When I got into real estate investing for others many years ago I would ask a potential client how much they were saving for retirement each month. Normally the number was very low. But let’s they said $500. I would then look for a rental property, perhaps needing some improvement, and structure the deal so that the negative cash flow was $500 (including debt repayment). I could get that client into a rental property that, with the tax benefits and appreciation, was growing in value more than three times this number. Returns of above 20% are common if not easily achieved in rental properties (more here). For more information, take a look at the videos here on www.retirementNEXT.com
Income Producing Websites have been growing in popularity and are something that like a snowball, can roll down the hill and gain value and additional income faster and faster – while you sleep. (more on Income Producing Websites here).
Investment’s in Stocks, bonds and mutual funds. You can set up automatic sweeps for your operational account into a fund – or group of funds and set this plan on auto pilot. While I am not a big fan of Wall Street (where I am definably a on the outside), I know that a regular contribution into a well-managed portfolio is important and can play an important role in building passive income