Personal Finance

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How to retire early – let’s break down the steps to early retirement.

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This video shows you how to retire early with shockingly simple math.

I’ve been a personal finance nerd for a while, and the idea of early retirement is really interesting. I’m a huge fan of Mr. Money Mustache who wrote a great article on the shockingly simple math behind early retirement. Since I make videos, I wanted to take his theories and break them down into a digestible video.

I hope you enjoy! And like I say in the video, please like and share this video, then leave a comment. What do you think? Is this amazing or crazy? What is your savings rate? What other personal finance questions do you have?

I credit a lot of this work/theory to Mr Money Mustache. Read his full article about it here (http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/). Also, check out this cool early retirement calculator (https://networthify.com/calculator/earlyretirement?income=50000&initialBalance=0&expenses=17000&annualPct=5&withdrawalRate=4)

Script:

Hi, my name is Phil. I’m a video creator and online instructor. I’m also a personal finance nerd.

Because of that, I want to create a series of videos that breaks down some of the most mystifying topics that plague our society.

In a world where people’s finances are typically locked away and not-talked about, I believe opening up the gates of financial conversation will help everyone live a better and smarter life.

In this first video, I want to explain the shockingly simple math behind early retirement – thanks to one of my biggest heroes, Mr Money Mustache.

While the ability to retire may seem like a distant and unreachable goal for many, the premise comes down to one thing. You need to invest money so that it earns more money. This could be investing in stocks or bonds, real estate, or any other of investment vehicles. As soon as your investments earn enough money for you to live on each year, you are able to retire.

Let’s break it down further to know when you can retire.

The most important concept is knowing your savings rate, basically how much you make minus your expenses.

If you spend 100% of your income, you will never retire… because you will never be able to invest any money that earns money for retirement.

If you spend 0% of your income, you can retire right now… because somehow you are living without needing to make any more money.

Between 0% and 100% are a number of savings rates that correlate with the years it will take to retire.

For this, let’s assume your annual investment return is 5% (which is conservatively low) and your withdrawal rate is 4%… meaning you spend 4% of your net worth each year. For example, if you have a ,000,000 net worth, and you live on ,000.

If your savings rate is 10%, you will be able to safely retire after 51.4 years. Safely, meaning you will never run out of money.

If your savings rate is 25%, you can retire in 31.9 years.

50%, you can retire in 16.6 years.

And if you can somehow save 75% of your income, you can retire in 7.1 years.

Now getting to that savings rate might not be easy in our world of societal pressures, keeping up with the Joneses, and bad habits. But you can get closer by making smart decisions, avoiding debt, and living simply.

The key take away is…
Cutting your spending rate is way more powerful than increasing your income because no matter how much money you make, decreasing your spending will speed up the process.

A note, The math behind early retirement works if you are working a minimum wage job or a 7-figure CEO salary.
It’s all about the savings rate.

So if you want to retire in 10 years, the math tells us that you need to save 66% of your income.

Now there is a lot that I didn’t talk about – like how to invest, and how to cut expenses to get to a high savings rate. Those will come in a future video.

For now, get excited about the honest truth about retirement (and early retirement at that!)!

Let me know what you think in the comments below? Is this exciting or bogus?

Until next time… start being money smart.

Please subscribe to the channel and leave a comment below!

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Newest Personal Finance Information

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Individual Finance
personal finance
Image by 401(K) 2013
Private Finance

I will be the designer for 401kcalculator.org. I have actually put all of these photos within the community domain and welcome anyone to make use of them however kindly credit our site since the resource should you choose:http://401kcalculator.org

Tips on Personal Finance

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personal finance
by dangoodwin

Are you struggling to make ends meet when it comes to your personal finances? Do you have trouble paying your bills each month? If yes is the answer to these questions then you should look at how you are managing you personal finances.

Which of the following would best describe you? a) A good personal finance manager that keeps within their monthly spending budget and accounts for and deals with any financial problem that may occur swiftly, or b) a bad personal finance manager that spends all of the monthly income and falls behind with their monthly payments. If it’s ‘b’ , don’t panic, you can learn to take charge of your personal finances.

If you are just starting to take your financial planning seriously then you will need to follow these personal finance tips.

Evaluate your current financial situation. One of the most important goals for most people is financial independence. Collect accurate information about your personal financial situation. Calculate your net worth which includes the real estate, saving and retirement accounts, and all other assets. This will help you decide how much money you can set aside for meeting future needs and goals.

A basic personal finance tip is to make a budget. A personal finance budget is information made up of your income and expenses and the more accurate this information is, the more likely you are be able to meet your goals and realize your dreams. A personal finance budget should be made for at most one year at a time and include a list of your monthly expenses.

Your personal financial budget must include all monthly expenses, like credit card payments. Check all of your statements thouroughly so that you can know exactly where your cash is going. This will help you make the tough financial decisions and priorotise your expenses.

Get an electronic bill pay. This is a very convenient way to pay your bills. You pay them electronically, by direct withdrawal from your bank account. The transaction is processed immediately. You can even link your bill pay service to your personal finance budget, so that your expenditures are automatically entered in the appropriate category. Personal financial management can be really easy.

Make an investment and finance plan. Now that the fundamental state of your personal financial security has been established, the time has come for the more prosperous part of your personal financial life. You need to make a personal finance plan of what you really want in life that money can buy. Your personal financial plan can be as simple or as detailed as you want it to be. Find out how to finally start to implement this plan and get the money to finance it. This is the long term part of your financial. This journey is the most interesting and exciting part of personal financing you can have toward financial freedom.

This personal finance advice will help you take control of your debt so that it doesn’t have a tight grip on you and you can look toward a brighter future.

This author has collected together many more articles offering finance tips and has also written a number of articles on topics such as bad credit loans.

Financial empowerment begins with an excellent foundation, based on understanding, option, and action. David Michaels talks about the basics of using control over and managing debt life.

More details on Women’s Financial Empowerment can be bought on https://www.aier.org/.
Movie Rating: / 5

A straightforward help guide to budgeting.