I don't care how much you love your job there's going to come a day where you
wake up in the morning with your back aching your knees cracking and your body
telling you that you're done working unfortunately this day will come for all
of us however the question is will we have the money to lay down our work
tools and start the next chapter of our life for those earning lower incomes the
idea of retiring early is probably a pipe dream however it shouldn't be and
in this video i will share with you how to retire early on a low income and if
you're new to the channel then hit the subscribe button below for more life
changing content the first step that is absolutely critical to your ability to
retire early on a low income is to remove all harmful debt from your
financial life notice how i said harmful debt this is because there are forms of
debt that can be extremely useful in your quest to retire early examples
include acquiring a mortgage that finances a rental property or a business
loan that helps you get your operations off the ground when i talk about harmful
debt you probably already have a good idea of what i mean but i will
explicitly say it anyways high interest debt i'm talking about auto loans credit
card debt and the criminally destructive payday loans now i want to make
something very clear if you can't remove these forms of debt for your life
especially as a low income earner you have absolutely no chance at retiring
early why is that because high interest debts are wealth destroyers here's an
example to illustrate what i mean let's say you had a credit card balance of six
thousand dollars at 18 and only paid the minimum 200 payment every month it would
take you 41 months or almost 3.5 years to pay it off not to mention besides
repaying the initial six thousand dollars you'd also end up paying over
two thousand dollars in interest payments as well let me ask you this as
a low income earner do you really have two thousand dollars extra just be
handing over to your creditors for fun i don't think so and this is why avoiding
this kind of debt is key to making the necessary strides in your finances that
will allow you to actually retire early now it's all good and well for me to
tell you not to play around with these costly forms of debt but what if you
already neck deep in debt well then you have some work to do and here's how you
can dig yourself out of that dead hole and find your way back to the surface
first you need to take account of your current debt situation assess which jets
are outstanding and how much each one is costing you then organize your debts
from the ones with the highest to lowest interest rates and start paying them
down one by one i'll be honest if you're not making a decent sized income then
this process will be rather slow but if you're motivated and willing to take on
more hours to supplement your income with a part-time job it'll be worth it
once you're back in the block when it comes to your overall net worth now once
you're high interest debt free you're basically retired early right not quite
there's still a ton of work to do the next step in setting yourself up for
drinks on the beach in mexico is to ensure your financial practices have
been perfected what do i mean by that let me explain when you're earning low
income you need to compensate for your low income with tactical financial
management skills in short you have to masterfully deploy and manage your money
whereas a high income earner can loosely oversee their money and can afford to
miss investing contributions from time to time as a low income earner you need
to have your finances on point 100 of the time so what best practices should
you have in place a few come to mind first off you need to commit fully to
two financial management practices frugality and automation let's talk
about frugality first not to be confused with being cheap where you spend as
little money as possible being frugal means only spending money on value added
items for instance spending money to increase your education or skill set
requires spending money and it can give you a leg up financially then it may be
worthwhile whereas if you were cheap you would probably pass on this opportunity
altogether however to be clear value-added items do not include things
like buying a new purse because it adds value to your outfit or buying a new
golf club because it will take two strokes off your game again because your
income is limited you need to really have a good grasp on your wants versus
your needs and focus your money on the latter now that you know that it will be
breathing down your neck whenever you spend money let's move on to automation
no i am not telling you to go and buy a robot because again this would be a want
and definitely not a needed item when i say automation i mean automating your
savings efforts by setting up automatic saving deductions from your pay with
your employer you can ensure that part of your paycheck is saved every month
and that you are in fact making the progress you need to be to reach your
goal of retiring early now you may be thinking but i am a diligent saver do i
really need to automate savings well i'm a strict eater but that doesn't mean
that from time to time the cheesecake i have in my fridge doesn't call out my
name to be eaten the point is that you want to take any risks to your financial
progression off the table over the course of your retirement savings
journey you'll run into moments of weakness and by having a system that
ensures saving rather than leaving it to willpower you can set yourself up for
success once you have these two critical financial practices in place the next
step is to create your retirement plan it baffles me how many people have early
retirement aspirations yet when you ask them how much money they need during
retirement or how much they plan to live off of in their golden years they look
at you like a deer in headlights well this won't be you because you're going
to have a plan in place in your retirement plan you're going to need
three things you're going to need a target retirement amount an investment
amount and a budget your target retirement amount is going to be the
total amount you'll need to have invested this is a pool of money that
you will withdraw from throughout your golden years so it's essential that you
properly calculate this figure generally the rule is that this number is 25 times
your annual living cost however given that i don't want you to have to work
the cash at walmart at 95 years old i recommend you use a more conservative 30
times your annual living cost instead therefore if you currently live off
thirty thousand dollars you would need nine hundred thousand dollars invested
to move into the retirement phase of your life now for some people the
thought of saving up nine hundred thousand dollars may seem impossible
first of all if i can get a date then it's proof that nothing is impossible
however if you're still feeling uneasy about this number you can always have
the choice of learning to live off less simply put the less money you can live
off of the less you need to save once you have this target retirement amount
calculated the next step is to determine how much you have to set aside every
month in order to meet this financial goal in the case of saving up 900 000
investing 750 a month assuming a 7 rate of return would allow you to reach your
financial goal in just 30 years this means that if right now you're 25
freedom 55 is just a few decades away now the question is does your budget
allow you to be putting 750 or whatever figure you've calculated for yourself
away every month this is where your favorite six letter word comes into play
your budget hate them or love them they are an essential component to you
achieving your early retirement goals why is that because they are the key to
unlocking the money you will need to fund your early departure from the
working world for instance if you set up your budget with your after tax income
and all of your expenses and realize that you won't have enough money to
spare to contribute towards your retirement account then right there
you've identified your first retirement roadblock in this case you can make
adjustments to your budget until you can plug in that investment figure you need
to meet however what if no matter how hard you try you can't seem to free up
enough money to meet your required monthly contribution well roll up your
sleeves because you need to get to work there are going to be times in life
where you need to make sacrifices to achieve your goals and if you find
yourself lacking the funds required to meet your investment obligations then
this is one of those times in this case you have no other choice but to make
more money now you may be thinking but you said i could retire early on a low
income and trust me i won't be asking you to suddenly start making half a
million dollars a year overnight however if you can do that that would definitely
help instead just calculate how much you can afford to contribute monthly and
plug the rest with extra work so if you're trying to invest 750 dollars a
month and could only muster up 400 working an extra shift a week can get
you to that goal contribution with a relative amount of ease again i know the
thought of having to work more sucks but it's going to suck more if you have to
keep working when it means having to listen to your boss for an extra 10
years or giving up time with your grandkids because as i say they grow up
so fast once you have access to your required contribution amount we will
defer back to the robots to help you meet your retirement goals similar to
automated savings you want to automate your investing efforts to put abundantly
as a low income earner you cannot afford to miss any investment contributions if
you want a chance at retiring early as such like your savings you have to take
the risk of human error off the table how do you do this you do this by
setting up an automated system that pulls money from your bank account every
month and invested towards your retirement goal amount this way whether
you swamped with work or on vacation or get sucked into an amazing new show on
netflix you won't neglect your retirement duties and making sure that
your money ends up where it needs to be at this point you have all the
information you need to retire early congratulations however i know that some
of you are sitting there struggling with the thought of even working another 30
years hell you probably don't even want to go into work tomorrow this sentiment
begs the question how can you speed up this process even further well you can't
speed up time or make compound interest work faster you can break your identity
as a low-income earner if right now you're a low-income earner i'm sure
you're well aware of how inefficient this approach is to getting ahead
financially you probably even look around and see people working a fraction
of the hours you are and making double or triple your income well you're giving
away almost every waking hour you have for a paycheck that barely gets you by
the truth is that the best way to speed up your retirement timeline is to make
larger contributions however to do this you need more money which means you need
to significantly increase your income i know for myself when i started
freelancing the extra two or three thousand dollars i was making a month
really accelerated my timeline to retirement and now i teach others how to
do the same in my course side hustle success i want you to think about this
if you're contributing a thousand dollars a month at seven percent towards
the target of one million dollars it would take you thirty years to acquire
this amount investing three thousand dollars a month however cuts his time
down to just 15 years in short the more you invest the less time you wait to
retire now i know making more money is easier said than done but the idea i
want to get across here is that just because you're earning a low income now
doesn't mean you have to be cashing small paychecks forever by requiring
valuable skills and experience you can exponentially raise your market value
and as such never work for a low wage again trust me when you're sipping a
cold beer on the beach in mexico at 55 you won't regret having broken out of
your low income rut hey it looks like youtube thinks this next video is the
one that will change your financial life forever give it a watch and let's see if
they're right