Saving enough money to last you a lifetime without having to work ever
again sounds unbelievable no doubt escaping
the employment world is a dream that most people hold
close to their hearts but have you ever wondered why most of your savings
attempts hit the wall or why you generally find it difficult
to start saving altogether it turns out tons of people take a shot
at saving without having a plan and you could be one of them when you're
aiming for early retirement having a structured savings plan will
help you get there faster which is why in this video i will share
with you the easiest way to save money and if you're new to the channel then
hit the subscribe button below for more life changing content let me tell you
the story of my friend mike and not only how he came across the 1
savings role but also how this rule helped him
cultivate sustainable savings habits that supported his dream of early
retirement meet mike mike is a tax manager at one
of the big four accounting firms or at least this was a position he held
until downing his work tools three months ago
to focus on his personal investments in golfing
which he loves before quitting mike was exemplary at his accounting job but
there was one thing wrong with his job he hated it despite his enviable career
success as a tax accountant mike's passion lied elsewhere he longed
for the day when he could have enough money in his bank account to hand in his
two weeks notice and never have to see his boss again while this
dream kept him up at night mike was clueless on how to implement a
strategy that would make it come true he had no idea how to save money and how
much he needed to save in order to get off the employment hook
after fumbling with different opinions he got from his friends
mike resorted to randomly depositing cash in his bank account every month
his savings strategy didn't follow any specific pattern and he only saved the
little cash that remained after spending his paycheck
one year into his trial and error savings attempts mike noticed that his
journey to financial freedom was stagnant
his savings account was starved he wasn't making any noticeable progress
and this meant that he would have to hold on to his nine-to-five job for a
longer he only had managed to save 276 dollars
by the end of the year and this compared to the money he needed to
retire early was pocket change this is when it dawned on him that he
needed to adopt a savings plan a plan that would act as a compass in
his financial journey and catapult him into exclusive financial independence
his goal was to retire by the age of 35 and being 27 at the time he needed to up
his game he needed a feasible saving plan that
would make him rich in eight years and it had to be a good plan
luckily for him he stumbled upon a personal finance workshop that turned
out to be his saving grace this workshop was a literal game changer
for mike he met jeff a 50 year old financial
expert that had retired from his previous it job at 32.
just like mike jeff had been a young energetic
young man stuck in his i.t job he had also longed to escape the rat race and
pursue his life passions jeff 23 then started implementing the
one percent savings rule and after exactly nine years he had
saved over a hundred thousand dollars how he managed to achieve this was still
beyond mike's grasp and he was eager to learn
what excited mike even more was that there wasn't a big discrepancy between
his journey and jeff's the only difference between the two of
them was that jeff had discovered the 1 savings rule earlier on according to him
this rule was fundamental to achieving any savings goals one had in mind
with the most important being early retirement because
as jeff explained that prospects of early retirement can be bright or dim
it all boils down to your savings habits the first phase of the workshop
dissected the one percent savings rule the one percent savings
rule draws emphasis on the idea that every six months one
should increase their saving percentage by one percent so if you
resort to saving 10 percent of your income every month
you should increase it by one percent twice a year if you do the math
this results in a savings percentage of 12 by the end of your first year of
savings if you stick to this trend without
slipping your savings percentage will shoot up by ten percent by the end of
five years and twenty percent within a decade this
revelation caught mike wondering where jeff had been all of his life
not only did this approach seem practical but it also allowed him to
start saving with whatever little amount he could afford at the
time before that mike had only come across
extreme saving strategies that required him to strip off every form of luxury
and never have fun again that workshop also helped mike estimate
how much he needed to save to retire by 35 which was just a short 8 years away
jeff went ahead to explain a formula that had helped guide his savings plan
it turns out the time mike would take to retire was paid to a
simple calculation his savings rate as a percentage of his take-home pay
and his savings rate depended on two factors how much money he took home
every month and the fraction of his take-home income that he spent
this means that he earned ten thousand dollars a month and spent all of it
he would never be able to retire but assuming earned ten thousand dollars
every month and saved all of it he could retire today mike knew that he
was closer to the never retiring end of the spectrum now
but felt confident that with his newly found financial education
their retiring early didn't have to remain a pipe dream but instead
could soon become a reality the savings rate model can be incorporated into a
graph with a saving rate on the x-axis and the
years needed for retirement on the y-axis
this way you'll be able to see how many years you'll need before you can retire
comfortably and still afford your current standard
of living if you incorporate these results into a chart
you can come up with the number of years needed for retirement while using
different savings rates based on this model it was evident
that if mike worked with a more practical rate like let's say
saving 50 percent of his take-home pay he could retire in about 17 years
but this is too long for him he planned to retire early in about eight years
and this meant that he had to stash away up to 70 percent of his income
he made up his mind that although it looked difficult he would go for it
his plan was anchored in three main milestones cutting down his expenses
using the one percent savings rule and setting up more income streams with
which he could use to invest in cash producing
assets upon making early retirement his primary
goal mike decided to re-evaluate his financial priorities
he realized that unless he adjusted his finances early retirement would be
impossible in a bid to get rid of heavy expenses
he first sold off his corvette convertible which was soaking up over
160 every month in terms of insurance second
he significantly reduced the number of times he ate out and cut down his
monthly tv subscription by half this alone saved him an extra five
hundred dollars every month from his take on pay of over five
thousand dollars after cutting down his expenses mike was
able to free up his budget and boost his savings rate by a huge margin
he started out with saving 40 of his monthly paycheck
and since he had no family to take care of at the time he was able to increase
his rate by one percent every month he came to learn that
reducing expenses was just as beneficial to him in the long run
as compared to increasing his income as jeff had explained
cutting down on his spending was like a double-edged sword this is because it
benefited his finances in two ways for one reducing the amount of money he
spent would enable him to save more and secondly it reduced the amount of money
he needed to retire early as a result his lifetime passive income
also increased since all the money was saving
was invested and generating dividend income if we considered the fact that he
had also learned about automating his savings
mike was becoming well equipped to retire early jeff's advice
emphasized the idea that automating his savings was the secret to building a
consistent savings culture in two years mike started contributing
to his employer's retirement plan in an automated fashion he ensured that his
employer was deducting his monthly contribution from his paycheck
before it found its way into his pockets and this worked in his favor
this automatically forced him to start budgeting
and drop all the expenses he didn't need mike was now living a very frugal
lifestyle but he was happier because his goals
were now within reach his next move was to boost his income
sources in order to expedite his pursuit of his savings
goals now mike had picked out another valuable
financial lesson from jeff's workshop see even when jeff had his i.t job he
didn't depend on it entirely jeff had set up multiple cash inflows
that enabled him to increase his savings rate
and invest in cash producing assets like real estate as these investments are in
dividends he reinvested them back into the market
and they continued to multiply the desire to try down a similar
investment path motivated mike to set up an
online side hustle in freelance writing and graphic design
he spent some extra hours after work creating digital products for the web
which he sold online to earn some extra money he used the extra
thousand dollars to earn from a side hustle to start investing in the stock
market and the good thing is the stock market
is welcome to every investor whether you only have 500 or a million
dollars to invest one major advantage of investing in the
stock market is that mike was able to leverage compound interest
the initial cash he invested accrued additional interest over time
and this accrued interest also gained interest before mike knew it his income
had snowballed into something substantial
taking this route eventually paid off for mike as his 35th birthday neared
mike began tabulating his total net worth impressively mike had managed to
gain assets worth over 1.5 million dollars
in the form of cash real estate and paper assets which was enough to cover
his frugal annual cost of living a week after his
birthday mike walked into his manager's office
mike and his manager got talking and this is when mike slid his two weeks
notice across the table and told his boss he would be leaving
leaving his manager's office mike couldn't help but marvel at the thought
of finally getting off the corporate treadmill
while the average person retired at the age of 65 mike
had managed to call it quits 30 years sooner if you're like mike and you're
eyeing early retirement you now have all the information you
need to retire early too create a savings plan supplement your
earnings to increase in your income and lower your cost of living and if you
do all these things consistently then you too can leave the rat race
early just like mike did thanks for watching if you want to go
from the life you have to the life you deserve
then hit the subscribe button now