- What's up money nerds?
In this video, we're gonna cover
how to retire in your 30s.
Because that seems to be the trendy thing to do nowadays.
A 2018 Employee Benefit Research Institution survey
found that only about 10% of workers
planned to retire before the age of 60.
And they didn't mention of course,
how many plan to retire in their 30s.
So I'm gonna go out on the limb
and guess that it's definitely less than 5%,
probably more like one or 2%.
So if you are someone who does wanna retire in your 30s,
then welcome to the 1%.
But planning to and actually doing the things
needed to get there are two totally different things.
It's like me saying that I plan to get paid in candy
as opposed to money next year.
But if I don't start the proper conversations
with my employer to make it happen,
then my dreams of becoming the modern day, Willy Wonka
are never gonna come true.
And that makes me sad.
And it all starts with when.
The best time to start pursuing financial independence
and early retirement, was back when you were 16 years old.
But the second best time is as early as possible.
So you actually have enough time
to retire in your 30s, if that's your goal.
Because we all know that it's better to start sooner
since you have one thing on your side and that's time.
The good thing about starting younger or sooner,
is that even if you aim to reach the coveted title
of early retirement in your 30s,
and you just so happen to miss the mark by a few years,
so by the time you're 41, 42 43,
you're still way ahead of the game.
I do have a little bone to pick with anyone
who wants to "Retire early,"
but we'll cover that later in the video.
So hang tight because you're gonna wanna hear my thoughts.
There's no one most important thing
that you have to do to retire in your 30s,
there's really three main concepts
that you need to get lockdown:
The inflows, outflows, and growth.
Hey, I'm Jarrad, and on this channel,
we talk about all things personal finance, investing
and wait for it, financial independence.
As always it is an absolute honor
to be graced with your presence.
So please do me a huge favor and Hulk smash
that thumbs up button your freaks.
Let me say one thing though,
because it's extremely important
to every single one of you watching this.
I have people of all ages reach out to me,
tell me their age, then ask me if it's too late
to start saving and investing to reach early retirement.
If this is a question that you're asking yourself,
then the answer is always a hard no.
That's because there is no such thing as too late
when it comes to starting the process.
Early retirement by definition
is being able to stop working before the age
we're able to at this point in time,
based on your current circumstances.
So if you were 35 years old with very little invested
and based on your current trajectory,
you can't financially stop working until the age of 70,
then in my opinion,
being able to retire at the age of 68
is considered retiring early,
because it's earlier than 70 years old.
There's no set number.
Creating some stupid, arbitrary, hard and fast number,
doesn't do anyone any good.
All it does is make you feel bad about yourself
and your situation to the point of not even wanting to try.
And at least trying to retire early
is the most important thing.
Now, of course, one of the good things about starting
as young as possible, is that you have the ability
to pursue something called coasting fire.
Now, this is where you essentially stuff as much money
as possible into your investments
during a certain period of time,
then it completely stopping
or reducing the amount that you were investing
every single month.
We're basically front-loading the largest portion
of your contributions
instead of spreading that amount
over a longer period of time.
So instead of investing say $300,000
from the age of 20 to 40,
you would instead invest that same $300,000
over a 10 year time period from the age of 20 to 30,
which would actually come out to about $2,500 per month.
And then after that, you would reduce
or completely stop contributing money to your investment.
But Jared, there's no way someone's gonna be earning enough
in their early 30s to set aside $2,500 per month,
are you crazy?
Don't worry because we'll talk about how to make that happen
in a few minutes here.
If you invested this $2,500 per month,
assuming a 7% return,
then after those initial 10 years, at the age of 30,
your investments would be worth around $414,000.
If you decided that you didn't wanna add another dime
and let that $414,000 grow on its own at the same return,
then by the age of 40,
that amount would nearly double to $815,000.
And just for fun, after another 10 years,
so by the time you reached the age of 50,
that account would grow to a little over $1.6 million,
all because you stayed focused for that initial 10 years
straight, then just coasted right on into that large amount.
Now I would personally suggest to doing this
for that initial 10 years
and try to keep it up for as long as possible after that.
Even if you don't invest that same $2,500 per month,
any little bit extra, we'll help you grow that $1.6 million,
a lot easier and a lot faster.
Choosing the type of fire lifestyle that you want
is gonna be important as well
so that you know how much money you need
based on the lifestyle that fits you.
Coasting fire is just one of five types of early retirement
lifestyles out there.
Now I made a whole video breaking down the other four types
in detail,
which I'll link up down in the description
and towards the end of this video as well.
One of the easiest ways to come up with a large amount
of money every month,
so that you actually can retire early
is to, wait for it,
eat Ramen noodles every meal for 10 years,
gain 50 pounds because of it,
then of course, spend all of the money that you saved up
on medical bills
because your health has declined substantially.
Jokes people, those are just jokes.
But seriously though,
it does come down to how much money you're spending
every single month right now,
that is the first thing that needs to be taken care of.
Shifting the balance between your expenses
and what's left over is the ultimate game changer
in this whole thing.
Continuing to spend 90% of your money on expenses
isn't gonna work if you want to retire in your 30s,
no matter what your income is.
Your savings rate is going to be the biggest factor
in determining when you'll be able to retire early,
more so than the returns on your investments.
I know that's a pretty bold statement to make
because there's so much focus put on the return
of your investments from the outside.
Well little Johnny, you should give your investment money
to us because we are smarter than you,
so we're gonna get you a high return on your investment
that beats the market.
And only for 1%.
Yes, that 1% is actually gonna cost you $500,000
over your investment lifetime.
But, hey, let's not focus on that total dollar amount,
let's focus on the percent, and that's 1%.
What?
I'm not saying returns aren't important at all,
but all things being equal,
meaning that what you invest in wouldn't change,
therefore your return would be the same.
The amount of money that you're investing
is way more important.
A 5% annual return on $30,000 invested per year
is going to net you more money
than a 5% return on $10,000 invested per year.
Not because the rate of return changed,
but because the amount invested changed.
Definitely sit down and take a look at what your current
savings rate is right now.
All you do to figure it out is take your income,
then deduct all of your current expenses.
Once you have that number,
you divide that number by your current income,
then multiply it by 100 to get your savings rate percentage.
With a 22% savings rate in this example,
this person would be able to retire in 34.7 years.
Now, if he or she tweaked their spending
just a little bit every year,
and was able to double their savings rates of 44%,
then their years to early retirement
would be cut by a little over 15 years
to 19 and a half years.
And that starting with $0 invested.
After going through this initial calculation
of what your savings rate is,
you might freak out at how low it actually is.
This is way more normal than you realize.
And if it makes you feel any better,
I used to have a 0% savings rate.
So yeah, that was fun.
There is another way to increase your savings rate
that I'll talk about later in the video.
It's actually how I increased a mine by 13%
in just one year.
In a previous video,
I broke down how I've been able to achieve
an 83% savings rate.
Now I know that this sounds insanely high,
and I agree that it is pretty darn high,
but keep in mind that this definitely
didn't happen overnight.
So if you look at your number
and notice that it is extremely low,
then don't get too discouraged
because this is something that is fairly easy to increase
over time.
All you have to do is just start with trying to reduce
your costs associated with the big three, right?
Housing, food, and transportation.
Now, I'm not saying to flip your life upside down
and change everything, but you can at least start small.
Even small tweaks in these three areas
can greatly increase the extra money
that you have left over every month.
Maybe it's a matter of driving somewhere
one or two times less per week than you normally do,
maybe it's a matter of eating out
half much as you do every month,
or we can't forget about this one,
maybe you just need to wear that underwear with holes in it
for just a few months longer than you normally would.
I'm not saying I know anything about that,
but I might know something about that.
These small changes can easily net you
at least a couple hundred extra dollars per month
that'll in turn increase your savings rate.
But once you have this extra money,
we'll need to do something with it,
which we'll talk about shortly.
They always say that money cannot buy you happiness,
but it sure as heck can help you reach early retirement
a whole lot faster than a lower paying job,
which in turn will probably make you a lot happier
in the long run.
Now, this is why evaluating where you're at
in regards to your current income is very important.
This is one of those areas where the things you choose to do
can have a direct impact
on how much more money that you can make.
Loading those pockets with as much money as possible
is going to help you reach your early retirement number
faster than anything.
Think of reaching early retirement
like filling up a hole with dirt.
The more money that you have coming in,
the bigger shovel that's in your hands,
which is going to fill that hole a lot quicker.
Yep, we just switched from talking about early retirement
to fill in holes with dirt, how about that?
It all basically boils down to how much value
you can bring to the people
who are willing to give you money.
The more valuable you are at your job,
the higher salary you can command
when it comes to negotiating that type of thing.
There's a reason people like Jeff Bezos or Elon Musk
have made way more money than you and I ever will.
They've created a ton of value
for millions and millions of people.
So they're compensated for that value.
If you work for someone else
and you're not in a commission-based position,
then your income is naturally going to be kept
to a certain extent.
Now there's a way around this
to help boost the amount of money that you're making
through things like moving to a different position
within the company that you're currently working for,
or going to work for a completely new company.
But even then, your income is still gonna be capped.
At companies I've worked for in the past,
when you move to a new position,
they usually say how you could see a pay increase
of between three to 12%.
While that sounds pretty good
and I don't think it's too bad at all,
unless you're moving to a different position
every single year,
it's gonna take quite a while
to level up that income fast enough.
Even with a range like three to 12%,
it's still completely out of your control
when it comes to how much more
they're actually willing to pay you.
If you've created enough value within the company
to where your raise should be more than that 12%,
then sorry, not sorry,
you most likely won't get compensated
for that additional value that you brought to the table.
They'll give you a nice little Pat on the head,
maybe give you a little trophy
or a little trinket or a little pin,
and call you a good little boy or girl
for all that hard work that you put in.
And most likely not to the fault of your direct manager
or any thing like that,
because it's probably company policy
and complete way out of their control,
so don't get mad at your direct manager.
I'm sure they're a very nice person.
The best workaround out there
for a job where your income is capped,
is start some sort of side hustle
outside of your full-time job,
where your income is directly tied to the actions
that you take.
When you do bring that 20% more value
within your side hustle,
your income will increase by 20% and guess what?
You get to keep every single penny of it.
It's no secret because you see me right here.
I am very bullish on YouTube as a side hustle
and launching any sort of side hustle on YouTube in general,
since this is where I started a lot of my side hustles.
That extra income for me has really sped up
how quickly I'll be financially independent.
And it's one of the contributing factors
that went into my savings rate increasing
by over 10% in just one year.
The great news is that a side hustle
is something that you can do outside of your normal
nine to five job
if you're looking for an extra income boost.
I have a friend named Erika
who was working as a full-time lawyer
that started a YouTube channel on the side.
In less than a year of starting that,
she made over $100,000.
But it didn't happen by accident.
She was very intentional with what she did
to grow her side income by that much money.
Erika actually just opened up pre-orders
for her "Mastering YouTube for Busy Professional" course.
The whole course is geared towards people,
just like you and me,
just like us who have full-time jobs,
don't have ton of extra time,
who wanna skip past some of the beginning mistakes
and are interested in taking the next steps
to level up our income.
After knowing Erika for quite some time,
I can tell you she is legit.
I've seen her teach YouTubers different ways
to make thousands and thousands of dollars more
than they would have without her specific knowledge.
It still blows my mind.
I'll have a link down in the description of this video
to gain access to her course
if you interested in that sort of thing.
I do know that as time goes on,
she is going to be increasing the price though,
because I personally think that she's undercharging
for the value that she's giving.
So if you wanna lock in a cheaper price,
then do it soon.
But other than starting on YouTube,
there is all kinds of other online
and even offline side hustles out there
for anyone to take advantage of.
An awesome way to get started is to create your side hustle
based around something that you already enjoy doing
or talking about or teaching about.
The best part is that you can do most of them
during the hours that you're not working
your full-time job.
And once again, it all comes down
to the value that you can create,
which comes down to your current skillset.
And the good news is that new skills
are pretty easy to learn
if you're willing to put in the work.
But to know when you can retire early,
you'll need to know what your expenses will be
in early retirement.
Now, this might seem like a pretty easy thing to do,
but unfortunately, it's gonna be nearly impossible
to predict what your monthly expenses are going to be
in your 40s, 50s, 60s, 70s and beyond,
if you do plan to retire in your 30s.
I can barely tell you with 100% certainty
what my expenses are gonna be in five years,
let alone 20 or 30 years down the line.
There's really no hard and fast rule
when it comes to this,
my best suggestion is to start out
with what your current expenses are today,
then adjust from there.
Once you have that figured out,
we can think through some of the normal expenses
that pop up as we age:
The cost of health insurance, doctors visits,
cost of living based on where you plan to live long-term
and things like that that are pretty obvious ones.
But for the ones that we can't fully predict,
it's better to throw a little fluff in there
just to be safe.
Maybe add a few hundred dollars to your monthly expenses,
to earmark for those types of things
that we just don't know about.
I wouldn't get too caught up in this initially,
since it's not as important at the beginning.
As you move closer to being able to retire early,
you can form up those numbers a lot more
and kind of be better at predicting,
hey, what am I gonna need once I retire in my 30s?
It's not the best idea to put your money
into a savings account to let it grow.
That's where investing aggressively comes into play.
I'm not saying to only invest in super risky things,
what I am saying is don't be afraid to invest
as early and as often as possible.
Outside of your emergency fund money,
the money that you have sitting in the bank,
isn't doing you any good.
It's basically dead money.
So make sure that you have it out there working for you
through various investments.
The faster you get that money working for you,
the more time it has to take advantage of compound interest.
Now, this is essentially where the returns on the money
that you have invested start earning its own returns,
then those returns start earning its own returns,
and the process just keeps repeating
for as long as you have the money invested.
You can of course invest in whatever fits
your investing style,
like individual stocks, index funds, real estate,
Pokemon cards or anything like that.
But I personally prefer investing the vast majority
of my money into index funds because that just fits me best.
If you're interested,
I have a whole video breaking down
everything you need to know about index fund investing
that I'll link up down in the description.
Okay, Now you and uncle Jarrad, we need to have a talk.
My biggest issue with early retirement is that,
I don't think it makes sense for most people.
Think about it,
not working at all, like earning $0 ever again.
And if you wanna retire in your 30s,
then you're still pretty young
with a ton of free time on your hands.
I know this sounds like a dream life
while you're locked into your full-time job right now,
but once you actually have the freedom of not working,
life is probably going to get a little boring.
Then the next thing you know,
you're having a midlife crisis
because that inevitable feeling
of having no purpose in life sets in.
If your plan is to donate time
in some sort of charitable way,
then the early retirement life
will work perfectly fine for you.
But if you don't plan on filling your free time with that,
then it's important to make sure
that you have some sort of work lined up
to where you earn just a little bit of income.
This is why I'm a bigger advocate for financial independence
over early retirement, every single day of the week.
That way you at least give yourself the option
and permission to maybe hop in and out of the workforce
from time to time, if you want.
Don't forget to hit that thumbs up button,
and check out the description for more resources
and play lists
to help out with all of your personal finance investing
and financial independence needs
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I'll see you in the next one friends,
done!