Imagine your perfect life. What do you want? Is it more time to spend with family? More freedom to travel? The flexibility to own your own business and fulfill your purpose? Financial Independence? To retire early?
I want those too. And I think that one common vein that runs through all of these things is that they would be much easier to accomplish if I had a large stash of cash that made me income every week, month, or year. This means I wouldn’t NEED to work a job or rely on anyone.
The math here is honestly the easy part. We all know that if we save money and invest it that it will grow to be a ridiculous amount over time. It is the emotional desire for instant gratification that makes doing this hard. We want nice cars NOW, we want a big house NOW, we want to travel NOW. And I get that, but bear with me.
There was a study done at a California university where they offered children a piece of candy. The doctor doing the study then told the children if they don’t eat the candy and wait until he gets back in the room (after an unspecified amount of time) they would get TWO pieces of candy.
Obviously some of us would like to wait and get two pieces of candy instead of just one, right? But that is not how the study ends. The majority of the children took the piece of candy and ate it right away. This shows our deep desire for instant gratification.
To take the study even further, they caught up with all of the children 18-20 years later and saw that the minority who were able to wait for the two pieces of candy became significantly more successful on average than those who couldn’t wait. Being able to fend off instant gratification for more worthwhile prizes is a difficult thing to do, but it will be worth it.
”Yea but I don’t make a lot of money, how am I supposed to save and invest?”
Well actually, that is why I’m writing this article in the first place. It doesn’t take a six figure salary to become independently wealthy. You don’t have to be fresh out of college. It just takes hard work and the ability to fend off instant gratification for a few years.
Case and point: Use this calculator and plug in your information. If you save the average amount (6% of your salary is average), it will take you 62 years to be able to retire. Retire meaning that your investments create enough income for you to live off of forever.
If you bump that savings rate, you can see how drastic the change is. By saving just 10% instead of the average of 6%, you are shaving off 10 years that you need to work before your investments cover your expenses. REGARDLESS of how much or how little you make. I recommend shooting for a 30%+ savings rate. That allows your to afford your current standard of living FOREVER after working and saving for about 28 years.
So what do you do? Build the life you want now. Do it in a way that allows you to SAVE and INVEST while also truly enjoying yourself. Spend money on what is important to YOU, not on what society tells you to. With that info, you can see how long you would need to work to live your dream life forever in “retirement”.
Retirement doesn’t have to be something we all wait 40 years to (potentially) achieve. I know that with some hard work, a little bit of delayed gratification, and some simple maths, we can all retire in less than 20 years.
If you are skeptical about my investment math, check out this article where I run through my assumptions and how to get started investing!
There are a great number of books on this topic, but if you would like to read an absolute classic check out P. T. Barnum's - The Art of Money Getting, or Golden Rules for Making Money. He talks a lot more about KEEPING the money you make, because that is all that really matters for building wealth.
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P.S. New blog posts coming your way every Monday!
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