Retire Early Retire Rich
Everyone talks about young people never thinking about retiring. However, they always couch it in the wrong phraseology. Retiring conjures up visions of old gray haired men with their trousers pulled up to their necks in bad patton leather shoes with an earpiece. However, ask a young person do they want to be rich, and everyone of them would say yes. Also, most young people have some semblance of doing something financial to be financially independent. They might be going about it badly, but in their heart of hearts they are trying to become financially independent. With the right attitude and information you could approach a young person and ask “would you like to retire when you’re 40?” and I guarantee all of them would say yes. If we put forth a clear definition of what retire really means, then none of this old fart images pop into mind. But wait, what if you’re over 40 already? Well then you would couch the question in “would you like to retire in 10 years?” That would get everyone nodding yes. The problem is, the people that desperately need to think about retiring in 10 years, don’t. Instead of them approaching financial matters with caution and armed with tons of information, they expose their credit score, sign on the dotted line and never give it a second thought. Six months later they are broke, out of work and have nothing to show for it.
Don’t think that this article should not be in this blog because I talk about lofty subjects like Goldman Sachs manipulating the price of gold and which investments took a nose dive. Some of the most practiced stock market players are the very fools I am talking about. They get taken for suckers daily in the market and keep throwing their money at it for years, hoping to glimpse some light at the end of the tunnel and never get over the learning curve. Meanwhile, their house is behind, their kids are malnourished, their wife left them months ago and their car is being repossessed. They are pretenders to the throne.
I include everyone in this article so that no one feels they are above this article. I would hope everyone would take a hard look at the points and ask themselves have they sat down and truly considered the consequences of their financial actions. I even include people that are “rich” in this article. I have it on great authority that 40% of the people that have a high income are leveraged to their eyeballs and in one fell swoop their house of cards could come crashing down OR they literally live paycheck to paycheck. Surprising, I’m sure, but my sources are pretty good on this. I’m sure you’ve seen the news reports on the phenomenon too, poor little rich guy.
10 Things to Retire Early
1. Start saving for retirement today, regardless of how much you bring in or how little it is. Pay yourself first before you pay your bills and debts.
2. Automate your retirement savings. As your paycheck or income comes in weekly, monthly or quarterly, setup an automatic debit to your retirement fund. The younger you are, the more aggressive you should be, pick a life cycle fund.
3. Save 15% of your income. Pay yourself first.
4. Set financial priorities: which financial matters must come first? Debts, bills and responsibilities (i.e. court orders) come first, in that order. (if court orders are cutting into your own personal savings amount, you need to get a lawyer and renegotiate them, can’t get blood from a turnip.) Prioritize and monetize what financial responsibilities or wishes you want after the necessities are taken care of. New furniture or a new bigger car needs to take a backseat if it cuts into your retirement amount. Instead of agreeing to pay for full tuition of your child, set an amount that does not cut into your retirement amount. Never assume the government or corporations cannot be negotiated with over financial matters. You must always look out for your best interest financially and if someone is trying to manipulate you into a situation that causes your lifestyle to be impacted adversely, take them to task, even if it costs you money to pursue it.
5. Sit down right now and figure out if your aging parents are expecting you to take care of them. If they are able to bring in an income right now, then they should bare their own responsibility of retiring comfortably. Sit down right now and figure out who is depending on you financially that ought not to be, i.e. and able body adult child that refuses to support themselves. (I’m not advocating kicking your parents out or your adult children out, but I am saying have a conversation. At the end of the day we all need to be responsible for our own retirement and no one else should impede your retirement because they refused to plan for their own retirement.)
6. Do not depend on company matching, or government announced programs or upcoming legislation as part of your retirement. Assume that no matching or program exists and you, yourself setup your own retirement plan. You can then negotiate with your company for a larger salary by refusing their benefit package. And, if enough people refused a government program or expressed that a program or legislation was unnecessary, they could get their taxes reduced.
7. Cut Back. Think about your big boy toys that you so want or someone else wants you to buy: i.e. furniture, cars, pilot lessons, state of the art appliances, etc. Instead of purchasing something that is not necessary, remove it off the list of #4 financial responsibilities. Unless they are replacing something that does not function, remove them from the list. Does not function means that the intended use is no longer available for the item, i.e. I don’t like the color, is not “does not function.”
8. Pay off all debts. Negotiate debts, even if you can afford them, to reduce them. Especially now, companies expect people to renegotiate debts and are open to it. Companies have no way of knowing if you have some unforeseen financial responsibility, i.e. your elderly mother got ill and you are paying her medical bill. They have no way of knowing this. You do not need to explain this to them, but simply request renegotiation of debts. Suspend 401k spending if you have debt. Pay off the debt before you put a dime into savings or a 401k. [a house note is not considered debt for this purpose]
9. Have 24 months worth of cash on hand. This means you have 24 months of all expenses and discretionary income in a safe in your home, i.e. not in a financial institution.
10. pay off items and do not incur more debt. This includes cars, homes and such. Once you pay off these items, going forward you would pay cash only to replace them. That means once you have paid off a car, you would only get another car if you could pay cash for it. You would only buy a new house if you paid cash for it. As such, were you able to pay cash for a new item, negotiate to get at the very least 30% off the listed or asked for price of the item. (included in the savings is your calculation of fees, which net your nothing and are just surplus costs added to your purchase for nothing in return on their part)