Hey boss today's video is gonna be a bit different it's an extract from my friend
nicholas goka's new book called the four minute millionaire the book is a
collection of 44 short lessons people can read in four minutes a day to make
personal finance manageable i read it and i have to say that i thought i knew
a lot about money before reading this book but i was surprised how much it
taught me in fact i believe you can use this book to achieve any financial goal
you have such as retiring early which we will now learn how to do using the
principles from the four minute millionaire how would you feel if you
didn't have to go into work tomorrow or the next day or the day after that in
fact what if you simply never had to work again think about it no more
meetings no more working light and especially no more pestering from your
annoying boss i think we can all agree that leaving behind the annoyances of
work would be a dream come true however sadly for most people being able to do
so is still decades away fortunately if you follow the five golden rules i'm
about to share with you you'll be handing your two weeks notice that work
before you know it but make sure you watch until the end because the fifth
rule will make or break whether you were in fact successful in retiring early
rule number one the rule of simplicity retirement while being the goal for most
working class individuals is a financial topic that is very often misunderstood
in fact people perceive retirement to be a financial milestone that is much more
complicated than it needs to be at its core retirement really just comes down
to having some way to pay your bills for the rest of your life without having to
work this typically done by either amassing a retirement nest egg and
drawing from it slowly over time or setting up income streams to replace
your 9 to 5 job regardless of which path to retirement you choose there are two
financial activities that are critical in making it to the finish line on your
race to retirement saving and investing you see saving is vitally important
because the more you save the more you can invest and the faster you can handle
your two weeks notice at work unfortunately many people falter in this
step of their retirement journey why is that you may be wondering it boils down
to one word awareness i hate to say it but too many people get to the end of
every month and scratch their head wondering why they once again have no
money left over this is a lack of awareness in action and if this sounds
like an experience you've had then don't worry i've got your solution if you're
struggling to save more money for retirement every month what you need to
do is set aside some time to sit down and figure out where your money is
coming from and where it's going to raise your awareness first tackle your
savings at a high level start slowly then dive deeper make a spreadsheet how
many expenses from last year can you track down how much did you save look at
your main expenses how much did you spend on rent how much is being spent on
food how much on transportation those are usually the biggest levers that we
can pull so it makes sense to pull them first once you know where your money is
going you can make lifestyle changes that will allow you to keep more money
at the end of every month and give you the capacity to start investing towards
your golden years the next question you need to answer is how much do you
actually need to retire and that leads us to rule number two rule number two
the rule of authenticity when you hear the word retirement what comes to mind
do you picture yourself as an older person saying goodbye to your colleagues
at work do you see yourself tending to your garden or going on a cruise for
most of us retirement is an idea heavily influenced by traditional education
legacy media punch out at 65 go on a nice vacation and play darts once a week
at the pub now this may be the retirement lifestyle you desire but it
might not also be one of the most important retirement lessons that few
people teach is that your retirement should be crafted to meet your needs not
the expectations of those around you let me share with you a brief story of how
going against societal norms in your retirement years can lead to more
fulfillment than you could ever have expected in 2005 a woman named sylvia
just completed law school and gotten her first job in new orleans then hurricane
katrina hit having lost many of her possessions to the disaster sylvia
decided to make a change instead of just rebuilding her life and replacing
everything she dropped most of her stuff for good and moved to seattle in order
to be less vulnerable to a similar event sylvia adopted a more frugal lifestyle
she delivered pieces on weekends and put her whole legal salary towards paying
off her student loans with her debt gone and just twenty thousand dollars in
annual expenses sylvia started investing most of her money she retired at age 32
with 1 million dollars in investments but not the way you'd think rather than
playing shuffleboard all day sylvia simply quit her job and did something
she'd always wanted to do she opened her own law of practice her 1 million
retirement gave her for the freedom to be her own boss retired but still
happily working see retirement doesn't have to be boring most of the longest
living people on earth continue some form of labor into their 90s and beyond
even if it's just a heavy involvement in everyday family affairs ultimately
retirement is about doing what you want when you want and living a life true to
you if you want to work then work if you want to watch netflix 18 hours a day
then that's fine too you'll have earned your own time freedom and as such can
use it any way you'd like but to get to this point you have to amass your golden
estate first which we'll cover in rule number three rule number three the four
percent rule at this point you now know two of the five golden rules of early
retirement but this third rule may be the most important so listen closely
well early retirement is about ditching the working world spending more time
with your family and doing the activities that work prevented you from
doing so far for many years it is still a financial problem that needs solving
arguably the most important question to answer on route to early retirement is
how much money do i need to save to retire post this question to the average
person and the answer varies greatly and this is for two main reasons the first
is that most people have never taken the time to consider how much money you'll
need to leave the working world for good alternatively this number will vary
because people's retirement savings vary based on their lifestyle of their
post-work life will consist of so as you can imagine someone looking to live off
two hundred thousand dollars a year in retirement will need a lot more than our
friend sylvia who can manage on just twenty thousand dollars a year to ensure
you aren't caught flat-footed if you're randomly approached on the street and
asked to give your retirement number let's briefly go over how you can
determine how much you'll need before you can start drafting your two weeks
notice at work it's widely advised that in retirement you should withdraw no
more than four percent of your savings every year if you intend on your fund
remaining intact for the entirety of your retirement this is because
withdrawing at a rate of four percent while it grows at the market's
historical return of eight percent allows your fund to replenish itself as
you continue to draw from it year after year the cool part about the four
percent rule is that can be flipped to calculate how much you'll need to save
up to retire when inverted this formula creates what's known as a 25x rule which
implies that if you can amass 25 times your annual cost of living then you can
call it quits and never work again however before you can use this
multiplier to provide clarity around your path to retirement you first must
determine how much you actually spend over the course of a year let me share
with you the most efficient way i've been able to find to calculate this
amount when doing my own retirement planning and calculating my annual
living costs what i did was review routine monthly costs for the last six
months don't miss what i just said there because this nuance is important i said
i review my routine monthly costs this means that i don't consider one-time
expenses like major car repairs or appliance replacements and calculating
my annual cost of living once you have an average you're spending for the last
six months you can multiply this figure by 2 to come to an annualized amount
next is where the 25 times rule comes into play take your annual cost of
living and multiply it by 25 for instance if your annual living cost of
40 thousand dollars your target retirement amount will be 1 million
keep in mind that this is just a rough estimation and you may decide to save
more i personally use a multiplier of 30 times to stay on the safe side but what
multiplier you use can only be determined by your risk tolerance and
anticipated future cost of living rule number four the rule of exponential
growth you now know what you want to do in retirement and how much it will cost
you're well on your way however the next challenge you'll face on route to early
retirement is actually amassing the money you'll need to leave your job
behind well fortunately we have a valuable ally in our fight for time
freedom and its compound interest in fact leveraging compounded interest on
route 2 retiring early is the difference between retiring early and never
retiring at all what do i mean by this let me explain let's say that you became
acutely aware of how much money you spend every month and are now able to
save a thousand dollars a month right now you're 25 and you want to retire at
55 at a rate of a thousand dollars a month in 30 years you would have saved
up 360 000 this is a lot of money but using our
four percent rule that would leave you with just over fourteen thousand dollars
here to live off of which probably won't be enough to afford the retirement
lifestyle you would have envisioned for yourself however what if you would have
invested that money instead investing a thousand dollars a month for thirty
years and an eight percent return would give you just under 1.5 million dollars
or almost five times more than saving a loan as you can see leveraging the power
of compound interest can make or break your early retirement goals keep in mind
there is one final element to your early retirement quest that cannot be
overlooked which we'll get into in rule number five rule number five the rule of
consistency they say that rome wasn't built in the day and nor will your
retirement fund that's okay because as an early retirement seeker you know that
part of this journey involves remaining consistent in your investing efforts as
we just saw in the example in rule number four saving for retirement isn't
a one-time event but a habit that is maintained over time unfortunately being
consistent in a retirement savings efforts is easier said than done because
retirement is still far away from many people it's easy to shirk on saving when
short-term financial demands enter your life for example spending on that luxury
vacation or buying a new pair of shoes may trump putting away money for
retirement some months and while one or two financial fumbles are okay losing
consistency in your efforts will only further extend your retirement timeline
this is why you need a plan to remain consistent you put in the work to craft
your ideal retirement lifestyle determine your retirement savings target
and wrap your head around how to invest it towards retirement it's now time to
execute one of the greatest gifts you can give yourself when striving for
early retirement is setting up automated contributions to your retirement account
this involves having your retirement account withdraw funds from your bank on
a weekly or monthly basis so that you never miss a contribution doing so
offers two main benefits first you ensure you continue to leverage the
power of compound interest by allowing time to be applied to your retirement
savings as you routinely invest second you avoid spending any of your precious
mental bandwidth on coordinating your retirement savings efforts which makes
this whole process a whole lot more palpable if you enjoyed the lessons from
this book and want to learn more you can get it now from amazon using the link
i've left below trust me if you're serious about making amazing strides in
your financial life then this book is for you