Most of the financial advice you will get in life comes from people trying to sell you something, and most of it is bad. First, consider the fact that if you reach financial independence at a younger age, Wall Street loses money. Consequently, there’s not any big money behind advice to slash your expenses, avoid debt and save your money. That’s why the entire narrative of life that’s fed to you through the media is shaped around a well-worn path: Grow up, go to school, work hard, keep your nose clean and, in forty or fifty years, you squeeze out enough cash for a short retirement.
Looking across the financial landscape of the American public, we can see that advice is not working. Americans, on average, are carrying too much debt, buying houses that are too big and losing too much cash needlessly. Most have a little in their 401(k) and hope they have a little equity in their home.
You Can Retire Early
You can retire early, even if you and your partner only make average incomes. There’s nothing to buy, no seminars to attend, no secret formulas fronted by well-dressed pitchmen. The hard part will be breaking out of the pathway through life that Wall Street has mined with a variety of wealth-sucking obstacles. That doesn’t mean you’re going to like it or that it’s easy, even though the world abounds with examples of people who have done it.
Slash Your Spending
Living frugally isn’t one path to riches, it’s the only path for those outside wealthy families. Even people making six figures are short on retirement savings because they let their spending expand to fit their income. That has to apply to every aspect of your life from food to housing to clothing, transportation and travel. Remember, I did warn that you might not like it. That means living in a smaller house or something really extreme like living in a van, camper or tiny house. It means driving a car that’s cheap transportation and wearing decent clothes but avoiding designer labels.
Become a Super Saver
Living frugally is the only way to have enough cash to save but, if you want to become one of those people who retires in their thirties or forties, you have to take saving to the next level. Next level, early retirement savers are constantly looking for ways to pad their cash savings. The math is simple. Save half of your take-home pay starting at age twenty and you can retire before your fortieth birthday. Up that to three-quarters of your take-home pay and you can retire inside ten years.
Maximize Your Income
Super savers are constantly on the lookout for ways to make more money. They work a day job and then take gigs at night and on weekends. Any extra money they make goes straight into savings. The ultimate way to maximize your income and to become of the really elite self-made wealthy is to eventually start your own business. That’s a hard road, but a lifetime of frugal living and saving money will position you well for success in business. You already have the proper mental outlook, and that attitude will determine the success of your life far more than the nuts and bolts of finance.
Investing is not rocket science. Start with low-fee index and income-generating municipal bond funds. Look for brokerages that offer no-fee trades on their own funds and don’t over-think it. Time is more important than timing and, if you’re worried about what the market might do in the future, then lean more toward dividend paying funds and real estate investment trust, or REIT, funds. Later you can educate yourself about income producing property and liquid hard assets.
I get that some of things suggested here are extreme. But extreme frugality and extreme saving are the foundation of financial independence. Combine extreme saving with conservative investing and you’ll watch your retirement war chest grow to the point you can seriously think about retiring short of your fortieth birthday.