It's simple.
If you want to retire before everyone else,
then you need to follow these three steps.
Firstly, calculate the real numbers.
Secondly, manage the variables,
and thirdly, execute your plan successfully.
It's really that straightforward,
but most people don't even
get past step one.
To be honest, 30% of people have
probably clicked off this video,
probably because retirement sounds
too old-school for them.
However, you might not actually want to retire early,
I'll explain why towards the end.
Well, that's for the few of you
that make it that far.
Step one, calculate the real numbers.
How much do I need to retire?
This is one of the most searched questions
on the internet,
and no one seems to be able
to give the real answer.
It's no surprise that lots of people
are turning to the internet
as the school system
has left us in the dark.
They're only interested
in pushing us into the workforce
so that society can exploit us
for our time and labor.
If most people actually knew the answer
to how much they need to retire,
then there'd probably be an uproar.
That's because millennials
and Gen Zs are reportedly
gonna have to work longer
than any other generation.
The sad truth is,
many people are deluded.
Some think they'll enjoy
round-the-world cruises
on the back of saving $50 a month.
Others believe they'll need
so much money that quitting work
is an unrealistic fantasy.
Most people are hurtling
towards a harsh reality check
without even knowing it.
It's not their fault
as they've been set up to fail.
Retirement was much more achievable in my day.
However, that's why it's so important
to calculate the real numbers now,
so you are at an advantage.
This is kind of like the first step
of any road trip,
setting the destination
on your navigation system.
Without it, how are you gonna head
in the right direction?
Right, I'm gonna cut
through all the confusion online.
You just need to focus
on the Rule of 300.
This rule is so powerful
that it allows you
to jump forward in time
and calculate how much money
future-you will need
to quit your job
and still pay the bills.
It's simple.
All you have to do is
add up your monthly expenses
and multiply them by 300.
This means, if you currently
spend $1,000 per month,
then you'll need $300,000 saved.
If you spend $1,500 a month,
this will mean you need
$450,000 in your account.
If you spend $3,000 a month,
you'll require $900,000
and so on.
You get the idea.
Now, I know what you're thinking,
"How much?"
But let's say, you do need $900,000.
You don't have to save all of that.
I'll reveal later how you can use
the power of compound interest
and only have to save around 110,000.
The Rule of 300 is based
on the ability to safely withdraw
4% per year from your savings.
The idea is that,
if you put your money
in the correct places,
then it will grow by more than 4% per year,
allowing you to take from your pot
without it running out.
It's a bit like
Hermione's magic bag in "Harry Potter."
I know this sounds great,
but it's very important.
This is just a rule of thumb
and not scientific law like gravity.
I mean, it's pretty impossible
to accurately predict the future,
'cause here are so many different factors
that we can't take into account.
If anyone tells you otherwise,
then they're trying to sell you something.
So yes, stock market conditions
and inflation could have an impact
on your final freedom figure.
However, I still think it's a good idea
to use the Rule of 300 as a guide
and adapt it as you go.
Now you've figured out your destination,
you can start increasing
your odds in getting there,
which brings me onto step two,
manage the variables
just as you need to use
the steering wheel, brakes,
and accelerator in a car
to navigate the roads.
You need to use these five variables
to achieve your retirement goal.
Variable one is of course, income.
I highly suggest that
you increase your income
as soon as possible.
This is your accelerator.
And if you are making more than the average,
you'll be able to retire before most people.
In my late teens,
I had an income problem.
After leaving school at 16,
I just wasn't making enough money
to pay my rent
and go out with my friends,
let alone save for retirement.
So I devised a plan to get a pay rise.
You see, I was working part-time
in a radio-controlled model shop,
earning next to nothing.
I thought to myself,
"How can I get the owner
to pay me more for the same work?"
For the next couple of weeks,
I worked my socks off
and I kept track
of all the sales I made.
I remember writing down every detail
in a little notepad.
When I got a chance, I sat down
and I looked at all my notes
and compared them with
what the shop had sold in that period.
One thing became very obvious,
I was making
all the radio-controlled helicopter cells
because of my expertise in flying them.
That's when it hit me.
I was valuable to my boss,
because without me,
he couldn't sell any helicopters.
Now I had this information,
I felt confident I could approach him
and ask for a raise.
I clearly explained my value to the business
and asked for the increase in pay I wanted.
I remember him staring at me blankly
for a couple of seconds.
I thought I'd offended him
until he let out
a little grunter nod of his head,
agreeing to pay me
exactly what I'd asked for.
Although this was a long time ago,
the principal remains the same now.
If you want to increase your income,
then you need some kind of leverage.
To have this,
you need to become valuable.
Maybe you could learn
some high-income skills
such as sales and marketing,
or alternatively,
start some kind of side hustle.
However, it actually doesn't matter
how much you earn.
It's all about how much you save,
and that brings me
onto variable two, expenses.
Even if you were accelerating
at full speed in a Formula One car,
if you had a massive parachute
attached to your rear wing,
then you aren't going anywhere fast.
This is exactly what it's like
having a good income
with too many expenses.
Look, I'm not one of those online people
that's gonna tell you
to stop buying Starbucks
and enjoying life.
I think that's a pretty sad way to live
if you like those things.
This variable is more
about cutting out the things
you couldn't care less for.
This is actually the perfect time
to come back to the Rule of 300.
Let's say, you spend $15 per month on Netflix.
If we multiply that by 300,
you'll see that you actually need
$4,500 saved in your retirement pot
to keep watching indefinitely.
Well, this is assuming
the price doesn't go up,
which it most certainly will.
Most people have little monthly expenses
that they don't really care about
as they seem so small,
but if you apply them to the Rule of 300,
then no small expenses
actually add up very quickly.
As well as cutting out little expenses,
I also highly suggest being smart
about the larger ones.
I'm talking about rent, mortgages,
and car payments.
These are the biggest silent wealth killers
as they're a huge drain
on your finances every single month,
but there are a few ways
to get around them.
The first is known as house hacking.
This is when you buy a house
and rent out part of it to a roommate
in order to cover the mortgage.
In America, you can also buy
something called a duplex,
which is two separate
living accommodations in one house,
allowing you to live
in one side of the house
and rent out the other.
The next is rent hacking.
This is simply renting out a house
and then subletting
individual rooms to different people
to cover all of your costs.
But before you start doing this,
make sure to clear it with your landlord.
The third is car hacking.
This is when you buy a car
that has lost most of its value already.
Drive it around for a couple of years,
then sell it for almost
what you paid for it
and repeat the process.
If you successfully managed
to drive down your expenses
and still live a great life,
then you can start thinking
about variable three, debt.
A lot of people aren't gonna like this one,
but you need to master debt.
Some people are totally against it,
while others are way too reckless.
I've always been somewhere
in between the two extremes.
It's kind of like the fuel in your car.
It can be very useful,
but it can also explode
if you're not careful.
Managing debt is crucial
for retirement planning,
because carrying too much bad debt
can eat away your savings
and make it difficult
to achieve your retirement goals.
On the other hand,
using good debt strategically
can help you build wealth
and increase your income,
which can lead to an earlier retirement.
It's important to understand
the difference between the two
and make smart decisions
about when and how to use debt.
Put simply, good debt is
when you borrow money to buy things
that will make more money in the future,
like buying a house
and renting it out.
Bad debt is when you
borrow money to buy things
you don't make any money on,
like using a credit card
to buy clothes, expensive holidays,
or a car that you don't need.
But here's the real kicker.
In order to get good debt,
you need to have a good credit score,
and the best way to do this
is to actually own a credit card.
You can put little expenses on it
and pay it off in full
at the end of each month.
This will mean you never pay any interest
and build a good score for the future.
But like I said,
the only reason to have good debt
is to buy assets,
which brings me onto variable four, investing.
Investing is important for retirement
because it can allow your money
to grow faster than it would
if you simply just saved it.
It's kind of like the boost pad you go over
when playing Mario Cart.
With the right investments,
your money can grow
at more than 4% per year,
which is the amount
you can safely withdraw from your savings
if you're using the Rule of 300.
I'm not a financial advisor,
however, I've always invested consistently
into the S&P 500,
which is an index fund
that includes a top
publicly traded companies in the USA,
which has historically averaged
a return of 8% per year.
I mean, if you were to invest
$200 per month for 45 years,
which equates to $108,000,
an average return of 8% per year,
then you would have a total of $1,054,907.
That's the power of compound interest.
But where can you start investing?
Well, it's a lot easier
than it was back in my day,
as you can do it all from your phone.
There are various different apps.
I'll leave some of the links down below.
One of my favorites is Light year,
and they're also kindly sponsoring today's video.
Lightyear is looking to give every European
low cost and convenient access
to the world's stock markets,
and they're really great
at what they do.
The app is super user-friendly,
making it perfect for both advanced
and novice investors.
Lightyear is available
on mobile and web platforms,
allowing for a smooth investment process
and research.
The platform has over 3000 stocks
and ETFs from the UK, US,
and across Europe,
including ones that track the S&P 500
which I mentioned earlier.
And there's more.
On Lightyear, you can also earn interest
on your invested money
in three currencies,
the euro, dollar, and pound.
If you're watching this from the UK,
the Euro zone, or Hungary,
you can download
and start using Lightyear today.
Use my code "TILBURY"
and receive a $10 fractional share
after making your first investment.
But let me remind you,
investing always carries a risk,
and the value of any investment
can decrease as well as increase.
Variable five, tax.
The more money you earn,
the more money the government
will try to take off you.
This is why you really need
to use the tax loopholes
to your advantage.
This is kind of
like your fuel tank leaking.
If you don't plug the holes,
then you'll have nothing left.
By using tax advantage accounts
such as Roth IRAs
and 401 Ks in the USA
and ISAs in the UK,
you can reduce the amount of taxes you owe
on your income and investments.
These accounts allow you to invest
and avoid paying tax
on the money you make,
but the amount you can put into these accounts
is limited every year,
so I strongly suggest
that you fill these up
as soon as possible.
And now you are ready for,
step three, execute your plan.
Just like you need
to adjust your driving style
based on the road conditions and traffic,
you need to adjust your approach
to managing the variables
in order to execute your plan successfully.
Put simply, the following techniques
will help you become a better driver.
Firstly, develop an ROI obsession.
When I was growing my wealth,
I was hyper focused on making sure
that everything I've bought
at least made me back
the money I spent on it.
A good example of this nowadays
is the MacBook Pro.
It's a great tool
that can allow you
to make far more money back
than you spend on it.
However, if you just play games on it,
then you'll have to save
all that money up
again the hard way.
Think about how you can use everything
to make you more money,
that way you'll never have to start
from zero more than once.
Secondly, measure your progress.
Make a habit of setting
clear money targets every month.
I remember not only doing this,
but also sharing them
with one of my friends.
I did this because I wanted him
to keep me accountable
if I missed a target.
It's actually been revealed that
this improves your chances
of achieving a goal by 65%.
Thirdly, stay cash poor.
A lot of people might not agree
with me on this one,
but I think if you save too much money
in a simple bank account,
then you get too comfortable.
I know I perform best
when I'm on the ropes
and have a lot of pressure to succeed.
By keeping myself cash poor
and investing all of my money back
into my index funds and businesses,
I was able to motivate myself
to earn more and remain flexible,
not stuck in my old comfort zone
and the old ways.
This concept is also known
as paying yourself first.
As you prioritize your investments
and then pay your expenses,
which is money going
into other people's pockets.
Put simply, invest first,
then force yourself to find
the other money you need.
Now for the people
that have made it this far,
here's why you might not want to retire.
Traditional retirement was created
to help encourage older people
to leave the workforce
and make room for younger people.
However, retirement can lead
to a loss of purpose and drive,
and many people find themselves getting ill
or losing motivation.
I discovered this firsthand
as I had enough money
to retire in my late twenties.
I took a couple of weeks off
and started to lose the will to live.
I lost purpose,
and that's when I started looking
into two different options.
The first, I'm calling micro-retirement.
This is a concept
where you take a break from work
for a short period of time
to pursue personal interest
and travel with the intention
of returning to work afterwards.
It's different from traditional retirement
as it's not a permanent state of not working,
but rather a way of taking a break from work
and returning to it later.
The idea is to break up the years of work
with periods of leisure and adventure,
allowing for a more fulfilling life overall.
Now, even though this sounded better,
it still wasn't for me.
I didn't feel like wasting my time
doing something I didn't want to do.
That's when I came across
a second alternative option,
lifelong retirement.
For me, retirement means freedom,
so I don't have to do anything
unless I absolutely want to.
That's why I built business
around doing what I like to do day to day.
If I don't like doing something,
then I just hire someone else to do it.
I'm sure some people have already commented,
"If he's actually retired,
why is he making the YouTube videos?"
The answer is that,
I genuinely enjoy doing it.
Who wouldn't like filming videos
and helping people out?
"Whoever said money doesn't make you happy,
hasn't given enough of it away,"
and I think that's even more true
for giving away knowledge.
If you'd like to know
seven passive income ideas
you can start right now,
then watch this next video.
But don't click on it just yet,
make sure to subscribe if you want to grow your wealth.
Okay? I'll see you over there.