Retiring a Few Years Later Can Make All the Difference

compound interestOne of the most important lessons in investing is to learn about the power of compounding. In many cases, investing early and regularly can make all of the difference in the world.

Let’s take look at a chart that shows the impact of investing $100,000 by age 30 vs. investing $200,000 by age 45 (assuming 8% average return each year). As you can see, even though the second individual invested an additional $100,000, they will have nearly $600,000 less at the age of 65… that’s a breathtaking difference!

the power of compounding

Investing $100,000 at 30 years old vs. investing $200,000 at 45 years old

But what if you haven’t had the luxury of starting to invest early? What do you do then?

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It’s Just One Purchase… It’ll Only Irrevocably Change the Final 50 Years of My Life!

Investment DecisionsWhat can $100,000 buy you?

  • Home expansion / renovation (~500-750 sq. feet)
  • Luxury car & costs for 5 years (insurance, gas, maintenance, etc.)
  • Camping trailer, insurance & lot for 5 years

What can $100,000 earn you?

Alternately, if you deposited the $10,000 saved each year over the duration of 10 years instead of spending on one of the luxuries above and then earn an average return of 7.8% each year for the next 30 years you would own investments valued at $694,763.08.

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Financial freedom: Where Do I Begin?

Steps to Financial FreedomThe first step is to consider what area interests you the most; it’s always easier to choose something that you have some degree of interest in because you will be more likely to best absorb the materials and take action.

If you’re a beginner and not sure what area interests you most I recommend you read one of the following blogs I’ve written that are geared for beginners on these topics:

Blogs

Financial freedom

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How to Make Realtors Want to Work With You When Buying Investment Real Estate

Relationship with realtorTaking the time to inform a realtor that you will not bid on a real estate investment opportunity and presenting him / her with the reasons why is an important step in the communication process for a number of reasons.  It helps you to create a relationship with the realtor based on trust, transparency and shows a respect for his / her time.

Showing a realtor that you are experienced and have a set of investment guidelines that you follow while also informing that the property doesn’t cashflow provides the required information for him /her to discuss with the seller and assess their flexibility.

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How to Perform a Real Estate Cashflow Analysis

This is what a real estate cashflow analysis looks like. It informs you of your up-front costs, assesses cashflow positivity with current and potential future scenarios, budgets appropriately for vacancy/repair/contingency and accounts for overhead costs even if they may be unrealized (e.g. property management, accounting, bookkeeping, etc.). It is also vital to highlight any assumptions and verify them in writing, absolutely no exceptions.

real estate cashflow analysis

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Save An Hour of Salary, Prevent a Day and a Half of Work in the Future

The power of saving and investingOver the last 112 years, the stock market has averaged an annualized return of 8.5%*.  If you were to invest a single dollar into the market and receive the average returns, in 30 years it will be worth $11.56 (see “The Power of Compounding”)!

Let’s translate this into a figure that will scorch an image into your mind that will hopefully transform your perception of the importance of saving and power investing.  Let’s talk in terms of something that keeps us away from doing what we want, when we want to.  Yes, that’s right… work!

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Start working for yourself without quitting your job!

Early RetirementWouldn’t you love to work for yourself?  Are you afraid to quit your job?  Surprisingly, you don’t have to!  You don’t even have to work any additional hours!  What am I talking about then?  It’s simple.  Start saving today!

Alright… at this point I’ve lost a solid percentage of my readers, individuals who simply aren’t willing to sacrifice their own “perceived happiness” just to save.  But hold up one minute there… what exactly is a sacrifice?

When I used to have to wait to purchase something I thought of it as a sacrifice as well, but as time has went on and wisdom has slowly creeped into my head I now realized that I had a threatening disease known as first-world slavery and that making the actual purchase is the sacrifice.  What?!  Am I completely nuts?  No, in fact I’m not!

Recover from these words, regain your composure and then continue reading my blog please.   It’s okay… you can do it.

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Quit gifting your financial freedom to the government

Financial freedomWhat if I told you that there is a legal way to pay less tax every year?  What if I told you that there was also a way to retire earlier and with more money than you would have if you continued down the path you’re on right now?  Would you take advantage of this?  Of course you would!  Well then keep reading and let’s get started…

Almost every individual has a tough time saving.  In fact, almost half of all individuals are living paycheck to paycheck… and sadly, this includes thousands of people making $100,000+ salaries!  Terrifying!

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Change The Way You Think About Purchases, Quit Being A Slave To Your Possessions

Slave to MoneyLast week one of my friends was talking to me about her weekend filled with her perceived much needed bout of “retail therapy”.  She talked about all the new clothes and shoes, and even more clothes that she bought!  She upgraded her iPhone to the latest version and she even managed to go out to both lunch and dinner twice!

We both know what happened after.  I completely lost it!  “Are you nuts?!” I exclaimed, “I cannot believe my ears!”.  She smiled and retorted in sarcasm, “I know… I know… I went a little overboard, but I work hard so I deserve it!”.  Ironies abound, what she didn’t realize was she was about to start working even harder just to cover the costs of all of these material possessions.  Believe me, I was once in this trap for several years of my life… I know this situation all too well.

After some coaxing I convinced her to reveal the details of her purchases over the weekend so that I can create a case study to present back to her (I got her permission to post it to my blog as well).  I just couldn’t take it that she was about to set herself up for decades of suffering and I had to at least try to pull her out of the trap of first-world slavery (self-inflicted by the lust for unnecessary physical possessions).

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Want to Achieve Financial Freedom? Stop Spending So Damn Much!

Saving moneyOver the past several months I’ve had dozens of discussions with family, friends and colleagues surrounding various topics related to investing in order to achieve financial freedom.  These discussions have blurred a number of different topics – What are the best investments?  What exactly is financial freedom?  How do I approach an opportunity?  How do I get over my fears?  And the list goes on.

Today I’d like to cover one of the most important topics to achieving financial freedom.  This topic in particular revealed both significant discomfort and resistance from the majority of my colleagues during our conversations – saving for financial freedom!

Saving for financial freedom isn’t a new concept.  It’s not even a complicated one, it’s simple, spend less than you earn and save the rest; optimally save as much as you can.  After all, if you aren’t capable of saving, you won’t have very much money to invest towards achieving your financial freedom!  Ironically, in almost every instance where the topic was brought up, the reactionary comment was something along the lines of “I can’t save any more money; I’m already barely getting by!”

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