One of my primary goals in life is to retire early. If you’ve consumed any of my content, you’ve probably heard me write or say that the standard “life model” is flawed in my opinion.
Going to school into adulthood while not learning skills very relevant to living a satisfying life, working at a job you probably dislike with people you barely tolerate until you’re in your 60s or 70s, and finally retiring at 70 to sit around and barely be a functional adult isn’t my idea of a great life. Retiring early and being able to truly enjoy life while you’re relatively young is effectively the only way to live an effectively well-lived life. But that leaves several questions. 1. Why Should One Retire Early?
2. What does it mean to truly retire?
3. How does one retire early?
In this article, I want to dive into all 3 questions and answer them to the best of my ability.
WHY YOU SHOULD RETIRE EARLY
First of all, I want to wedge the concept of early retirement into your brain. Believe it or not, it is possible to retire early. And it doesn’t necessarily require you to be a millionaire. However it will require work. And it will require some simple financial concepts. But I do think it’s doable. Now, when it comes to why you should try to retire early, I want you to understand two things:
Time is Valuable
Time changes you
I think at a subconscious level, we understand these two things to be true. But we don’t quite allow our conscious minds to think or act upon these concepts. Time is your greatest asset in life. The quicker you can move from concept to execution to achievement of a goal, the better. People also neglect that time will change you. You’ve experienced this before but I imagine you haven’t thought much about this on a deeper level. You haven’t extrapolated this thought. As you get older, you change and the world changes as well. This happens in a manner dependent and independent to you. For example, as a male your physical capabilities will decline as you age. Sure, modern medicine can delay the decline. But certain things like your sex drive, your energy levels, physique, etc. will fade away as time goes on. This applies to women as well. As you age, your beauty and desirability declines. Your ability to maintain a certain weight or size will decrease. Sure, modern science can slow the process. But this change is inevitable. Sadly, whether we like it or not, the world will change based on how we change. A young man that’s in peak physical condition might be seen as admirable or competent without even opening his mouth. He might garner attention based on his projection in life. As the world encourages him, he becomes more confident. However, the same man in old age will likely get little to no attention as his traits have changed. A 50 year old man that’s yet to accomplish much will be seen as a loser or simply unremarkable.
The same man likely can’t gain the same attention even for his physical capabilities as his testosterone has dropped and his ability to command an audience has dropped. In short, he’s past his peak and everyone’s looking at the new generation.
Let’s also use an example for women. A young lady in her twenties might effortlessly garner massive attention. Every man she meets, regardless of age or status, might desire her. They might be willing to invite her to parties, events, and mingle with high status individuals. Her age and beauty could effectively make her rich when we consider the doors that could open up to her. However, the same girl in her 50s likely won’t have nearly as much attention, if any at all. The world around her will become a reflection of who she has become. All of the doors that were once open to her have closed and the rooms she used to have access to will require a new key or perhaps an unorthodox method of access. Age affects us all. This is one of the major reasons why waiting until old age to retire is an absurd concept to me. Frankly, it’s illogical because money can’t replace time. But time was the price you pay for money if you wait until old age to retire. Keep in mind, I haven’t even factored in the likely possibility that sickness might take you away from the world before you even get to retire. Or, perhaps that dream of relaxing on a beach in Monaco or Tulum won’t be so appealing when your liver no longer functions properly. Or once you’ve had several hip surgeries and struggle to walk. Or if you’ve had skin cancer. Or one of the many other afflictions that old age invites. I’m not being negative. I’m simply being realistic. Time and money are best enjoyed in your youth. This is why I believe everyone should strive to retire young. Abandon the classic model of retirement.
WHAT DOES IT MEAN TO RETIRE EARLY?
Now, I need to make something clear. I have a different definition for retirement. It’s likely one you’re unfamiliar with. I want to make something clear to you. I view the idea of retirement as having the means to use your time as you see fit. It’s freedom in a nutshell. But freedom on your terms.
In general, retirement is waking up when you want. Going to bed when you want. Interacting with who you want. Spending your day the way you want. It’s doing what you want. There are many ways to accomplish this. However, I’m going to share with you the way I almost did it soon.
Before I get into it, I need to make this concept clear to you. Retirement involves the following idea: Your Passive Income > Your Expenses. If you can make this happen, you’re one step away from retirement. Does this idea seem simple? It should. Because it is simple. It might not be easy to accomplish (and I’m not saying whether or not it is or isn’t), but it is simple to understand. You need your monthly income to exceed what you spend. Once you can accomplish this, you’re free to use your time as you desire. Typically, when you retire you might receive a pension. This is money provided monthly that your employer or the government gives you. My recommendation: Take retirement into your own hands. Use the formula to your advantage. And live life to the fullest immediately.
Believe it or not, I’ve seen instances in which a pension doesn’t adjust well for inflation. This means that a retiree receives a monthly income that doesn’t adequately cover their basic living and food expenses.
So, what does this means? Well, it means that retiree that waited decades to stop working will sadly need to work everyday until their death. Unless a family member can supplement their lifestyle or unless they win the lottery.
I’ll be honest. I’ve personally known older people in their 70s that were working 2 jobs. Not by choice. Not because they loved it. Not because they were bored. Because they had to. The money they’d receive from a pension or something similar just wouldn’t cut it. Again, stop and think for a moment. Do you love your job? Are you willing to work your current hours at your current pace at your current pay until the last day you’re alive? If the answer is no, then keep reading. You need to make early retirement your new goal.
HOW DOES ONE RETIRE EARLY?
So I’ve explained what it means to retire early and why you should retire early. Now, it’s time to cover the how. Understand this. Ever since college, more or less, I knew the methods to retire early. I actually knew of several ways. However, life takes it’s course and causes you to deviate from your path. At one point, I was potentially exactly where I needed to be to be on the path to early retirement. But I lacked two basic tenets. I lacked patience and I lacked insight.
Now, I’d like to say I have both. While it’s excellent that I’ve made these mistakes so young and I’m working toward my goals, I still would like others to learn from my mistakes. If you’re young, then that’s excellent. Give my following tips about 5-10 years and you’ll be set. You won’t need to be the 70-year old working 2 or 3 jobs while still taking shit from everyone else. And even if you’re older, you should still be happy. I’d say that about 95% of people never even consider early retirement to be possible. And if they do retire, they’re stuck on such narrow margins that they can’t enjoy the remainder of their lives. Either way, trust me when I tell you that this article is extremely valuable.
Now, if you’re in my newsletter (which you absolutely should be) I already broke this down a little. You could’ve been asking questions and executing. But you probably haven’t yet because you’re not in my newsletter.
Join it as soon as possible because I’m going to be sharing a lot there first (and often exclusively). Also, unlike most people online, I’m going to go as deep as possible without charging you for everything.
However, in this article, I’m going to expand on what I taught in the newsletter. My goal is to set you on your path to retirement by the end of this article. As always, join my telegram group if you have any questions. Now, for the 6 steps to retire early.
In order, these are the 6 steps I recommend to retire early.
1. Work as much as possible at your job (this includes overtime)
1a. Calculate how much you spend per month and per year
2. Get a second job or side hustle (if overtime isn’t an option)
3. Find a property for sale (preferably in the vicinity)
3a. If possible use an FHA loan on a multiplex
3b. Live in one of the units and rent out the remaining
4. After a year, move out of the property and repeat step 3 5. Hire a property manager
6. Do this until your passive income exceeds your spending
Very recently, while journaling and reflecting, I tried to formulate a process to retire. I tried to review what I’d already done recently that may have moved me toward my goal and what’s moved me further away.
As I journaled, I realized that I was already on track. However, my lack of patience and insight pulled me away from my target. Hindsight is 20/20, right? While I missed some key opportunities and steps at the time, looking back allowed me to see the gifts that I missed. My hope is that by reading this, you’ll be able to pick up the gifts and opportunities I left behind and get further ahead with them.
The six steps mentioned above were the gifts that I’d missed several years earlier. These were the steps I could’ve taken to retire.
Once I realized those 6 steps above, I chuckled to myself a little. My goal could’ve been accomplished a lot faster and with far less stress. I’m going to go into each step and what I would personally do if I could go back in time. These steps should be considered frameworks. To be honest, I don’t think you’ll need to do these steps to the exact same degree that I would currently do them in. I’m a bit of an anomaly. I can literally wake up at 5am and work until 12am the next day. I enjoy working though, so working for me is similar to a young man playing video games. It feels like an accomplishment.
But I think that tackling the above steps without working all day and every day can still yield amazing results. With all of that being said, I believe that my way and steps above will allow you to accomplish the goal of retiring in the shortest amount of time.
1. Work as much as possible
Several years ago, I worked at a well-paying job and also did several jobs on the side. In total, I was making about $60k per year. Which, for a 26 year old, is a pretty good income in my opinion. Despite the work I was doing, I still had plenty of free time. I was undisciplined. And in my free time I’d waste tons of effort chasing girls and wasting money at bars and clubs. This is one of the worst ways to use your money and free time.
To be honest, if I knew better I’d invest all of my free time trying to learn skills to start a side hustle that could be done remotely and that could eventually evolve into a business. Regardless, even if you’re not so entrepreneurial to start your own business, I’d still recommend working at job as much as possible. Your goal by doing this is to hoard capital. Stockpile as much money as you can!
In order for the next few steps to be possible, you need to have liquid money on hand. Do not invest it in a 401k. Do not invest it in an IRA. Do not use it to invest in ads for a thousand other ideas and businesses. Trust me, from personal experience I can tell you that this is a bad idea.
These financial tools are designed for the slow retirement plan. This is for someone that wants to give someone else control and retire in their old age. While these tools aren’t the worst things in the world, I think it’s easy to feel comfortable and get seduced by the. My steps will be better in the long run. Stay focused. Work a lot. And save your money with the intent to use it adequately in the next few steps. Understand that if I could go back in time, I’d simply sacrifice two years of my life to working non-stop. I’d go out on dates very little. I wouldn’t commit to any girls. I wouldn’t go on any extravagant or costly vacations. I’d simply work. My reasoning for this is because the more work I can do, the more money I can make in the shortest time period.
Dating, parties, and clubs are very fun and can be rewarding. However, they don’t typically add immense value to your life. Plus, they’ll always exist. There will always be pretty girls to date, there will always be bars to drink at, and there will always be clubs or events to get lit at. You might feel FOMO. But believe me, you’re not missing anything besides reaching your full potential and living a happier lifestyle if you don’t try to retire as quickly as possible.
1A. Calculate how much you spend a month/year
This is an important step. I’m a big believer in the expression what doesn’t get measured is not managed. In order to know the numbers you need to hit (which I’ll explain in a moment) you need to know what they are. Do the following steps:
Step 1: List all recurring expenses you have
Step 2: List all consistent expenses you have each month over a 6-month time period. Then, find the average (mean) of these expenses
Step 3: Try to eliminate or reduce your expenses as best as possible. Focus primarily on your recurring expenses.
If possible, cancel most of your subscriptions. You can live without Netflix for a little. You don’t need Spotify premium. That subscription box for your dog isn’t important--fido doesn’t need a new chew toy every single month. Step 4: Add everything together from step 1 and the average amount you calculated from step 2 to find out your typical monthly expenditure.
For example, let’s assume your necessary recurring expenses are 1800/month. Now, let’s also say that you spend, on average, $450/month. Your combined expenditures per month are around $2250.
Step 5: Multiply the number from Step 4 by 12 to get your yearly expenditure.
$2250 (monthly expenditure) x 12 (months per yr) = $27,000 (yearly expenditure)
Step 6: Add $10k to that number which will be your safety number. Once you do this, you’ve calculated how much you need to make per month and how much you need to make per year passively in order to retire. For example:
Monthly expenses: $2250 (You need to exceed this passively)
Yearly: $27,000+ $10,000 = $37,000 (the amount you need per year to retire passively).
2. Get a Second Job or Side Hustle
This second step is optional. Do this if you’re in a rush to retire as quickly as possible. Also, consider this step if your current job doesn’t allow you to work overtime.
In hindsight, I realized that I had a lot of free time after my standard job. Keep in mind that during this time, I also worked as a Real Estate agent in my off hours. Despite this, I still had hours that could’ve been invested into making more income direct income.
Unfortunately, Real Estate is a commission based job. You don’t earn money for the hours you put in. You earn money when you close a deal. This was a difficulty venture for me as there are multiple steps in which a transaction can fall apart so you’re never truly sure a deal will go through.
Plus, as a solo agent with no external income sources coming in, high expenses from student loan debt and credit card debt, and no safety nest in the form of savings or assistance from parents, siblings, or a spouse, I was basically always in the negatives. If I could go back in time, I wouldn’t take Real Estate too seriously as an agent. I’d learn the dynamics of real estate and dabble a little bit to understand the nuances that couldn't be found in books or videos easily. But overall, if I were trying to retire as quickly as possible, I would focus on working a job or side hustle that would allow me to directly turn my time into money.
As a side note, if it’s possible to start your own business that could make a better return on your time, that would be ideal. However, many businesses take at least a year to see any profit. And a business can require a lot of time, effort, and emotional management that can distract you from the bigger picture or derail you. A second job, overtime, or a side hustle that can pay at least a modest amount such as Uber or Lyft might be your best bet since the income is guaranteed and can be controlled based on time you put in.
I must reiterate, if you can do overtime, this is the best strategy.
It’s easier to do a job you’re familiar with for longer hours than work/learn different jobs which could stress you out.
Keep this in mind as well: Do not spend the additional income you’re making. You're pooling together money for the next step. My belief is that money should be spent. However, sometimes it’s best to save for a brief period to purchase something that’s more costly.
3. Find a property for sale
This is where we get into the true action steps of my process. These following steps are going to be fairly specific and a bit technical. I highly recommend reading this section multiple times. Also, please DM me or email me if you have any questions on any of the following terms or processes. First of all, you’re going to need an asset. I mention this more extensively in my Basic Finance Course, which is FREE to stream or download. However, the short definition of an asset is anything that produces income.
There are many assets that one can buy but the simplest asset to purchase that has a proven track record over decades is Real Estate. For this reason, I believe you need to purchase a property. Below I’m going to outline the steps to purchasing a property and what to look for.
Hire a Real Estate Agent
This must be noted. I’m an advocate of saving time and doing things quickly. By quickly, I don’t mean sloppily. I mean that you should decrease the time between idea and execution. Even though I’m going to share some steps to purchase a property, a lot of what I recommend will still be confusing and will still require practice. Real Estate can be complicated and there are various nuances that come up that can be unique to each transaction. Even seasoned real estate investors or agents that have been in the business for 10+ years often still hear of unique issues or problems that come up. For this reason, I highly recommend hiring an agent. A good agent will be able to do basically all of this for you, will hold your hand through the process, allow you to access their network in order to increase the odds of a transaction completing, and will save you both time and money. Real Estate agents are almost always free to a homebuyer too, so there’s no reason not to take advantage of them.
I cannot emphasize this above point enough. So many people I meet have an interest in buying a house. Yet they don’t speak to someone qualified to help them purchase the largest purchases of their lives. Interesting enough, many industries have professionals that will charge hundreds of dollars an hour to answer a fairly basic question that can be googled. However, Real Estate agents, who are usually hungry to meet potential buyers and help them at no cost, get neglected. Despite what people think, there’s a lot that goes into a transaction behind the scenes and the information/knowledge of an experienced agent is extremely invaluable.
I bet if you were in an accident or were sued and an excellent attorney offered to represent you for no charge while giving you high level service, you’d do it, right? Why not apply that logic with a real estate agent?
(Be sure to consult a local Real Estate agent in your area for the specifics on how to hire one. Also, if you need an agent, DM or Email me. I have a network of agents in each state within the US that I can connect you with).
Locate a Multiplex Unit or a Large House
Your overall objective when purchasing a house is to make sure it’s cashflow positive on Day 1. This means that the very second you purchase the property and close, you should have calculated the net profit per month of the property.
There are tons of ways to purchase a property. However, I’m going to share what I believe is the simplest way for a beginner. 1. Get Pre-Qualified from a bank
A prequalification will give you a general idea of what you can afford based on documentation you provide to a lender. While a prequalification isn’t always the most accurate when it comes to affordability, a good mortgage lender should be able to give you a good number that’s close to what you’ll be preapproved for. Once you’re given a general number for what you can afford, ask you lender about a preapproval. Depending on how soon you’re thinking about actually purchasing a property, keep your numbers in mind but don’t get the preapproval until you’re actively searching with the intent to purchase. I recommend this just because a preapproval may slightly hurt your credit score and could impact other purchases you intend to make. 2. Look for a property under $300k
This will be easier said than done depending on where you live. But I recommend looking for properties under 300k for your first investment. Why? In my opinion, a property under 300k has a much greater chance of being Cash Flow Positive on day 1, which is what you’re looking for. While some people believe that never having anything besides a positive cash flow property is acceptable, I’ll say as a side note that breaking even isn’t terrible as long as the property is in an appreciating area.
Over time, by simply holding onto the property and breaking even each month, you’ll still gain equity and that equity can be leveraged later on down the line or can lead to a lump sum of cash when you sell your property.
However, don’t look for a property that can simply break even. Do your absolute best to find a property with a positive cash flow.
Now, exactly how do you find this property? Again, a Real Estate agent will be able to help you so you don’t need to use your own time. But if you’re the ambitious, lone wolf, type I’d recommend using Zillow or Realtor.com to find properties that are on market. First, I’d look in areas close to you and see what’s on sale. This is the simplest and most direct method of finding a property. Another, more complicated way to find a property is to look for properties off-market. If this is the route you choose to go, looking for off-market properties, I’d recommend the following
Look up properties that closed for under $300k in the past 30-60 days
Send out postcards or door knock the houses nearby that are not on sale and did not recently close. Chances are, if you reach out to some of these homeowners, they might be more inclined to sell.
The law of large numbers will suggest that you should be able to find a deal every 100 houses you contact (although this is a general number and not guaranteed).
Negotiate a deal in which you’re able to purchase the property while it’s off market.
Again, this method is more complicated than searching for properties on the market. However, this can allow you to find better deals and avoid a lot of competition. If you want more questions on off-market properties, DM or Email me. Once you locate a property that’s under $300k, you’ll need to calculate how much the property will cost and determine if the property will make money.
The simplest way to get general numbers is to look at the current and recently closed rents in the area. Be sure to look at what’s currently on the market to rent and what’s been leased over the past 30-60 days. Also, make sure the properties you’re looking at are as close as possible to the property that you’re interested in buying. Be mindful of Square Footage, layout, location, bedroom and bathroom amounts, and whether the area has similar amenities to the property you’re interested in buying.
There are many ways to calculate the overall cashflow of a property. One of the simplest tools you can use can be found here https://www.calculator.net/rental-property-calculator.html .
Again, this is something I highly recommend working with a real estate agent or a seasoned investor on. They’ll be able to give you a deeper look into the nuances of purchasing a property and pitfalls to avoid.
3A. Use an FHA loan
There are a variety of different loans you can use to purchase a home. However, I recommend keeping things simple and using an FHA loan. Why? An FHA loan will allow you to put anywhere from 3-5% down to purchase a property.
This means that if you find a property at $300,000, you can put down $15,000 to purchase the property. This is a simplified breakdown of what you can expect but it’s a close estimation. With a conventional loan, which is another common type of loan, you might expect to put down 20% of the purchase price ($60k in this instance). So, as you can see, the FHA loan will allow you access to purchasing a property at a fraction of the cost. Now, as I mentioned earlier, your best strategy is to find a multi-unit property. If you can find a duplex, triplex, 4-plex, or 5-plex property, you’re eligible to use an FHA loan as all of those property types are considered residential properties. As you find anything above 5 units, those properties are considered commercial properties and require a different type of financing.
3B. Live in One of the Units
Once you’ve identified a worthy property and closed on it, I highly recommend a technique known as House Hacking. House Hacking involves you living in one of the bedrooms of the house you purchased or in one of the units. From there, you rent out the other units to tenants (if you have a multiplex) or the other bedrooms (if you have a single house with multiple bedrooms). Remember, in either scenario it’s one mortgage.
So, by renting out other bedrooms or units, you’re able to either reduce your monthly mortgage payments or, ideally, make money each month from your tenants paying you. When done correctly, you should be able to effectively live for free while still paying off your mortgage. Again, this is why it’s so important to do the math ahead of time. You’ll need to know if the property will cash flow positively. Let’s take a look at the chart below to see how the numbers could play out.
I want to be clear that these numbers are simply for demonstration purposes. There might be other costs and expenses not found above that’ll apply to a transaction you’re in. The chart above is just to give you an indication of what some of the numbers will look like.
So, for example, imagine you’re able to find a 4-plex.
Let’s say you put 5% down ($15,000) and your monthly mortgage payment is about $1700/month. Ideally, you can live in one of the units and charge the remaining 3 tenants within the remaining 3 units $600/month.
(For the sake of this example, I want to keep it simple and omit something known as Cap X, which is short for Capital Expenditures. Long story short, there are other expenses that you should save money for when purchasing a house. These expenses should be considered when determining cash flow. However, I want to keep things super simple for now by excluding it).
This would earn you $1800/month and allow you to profit around $100/month.
Now, the good news is that there’s a good chance you'd be charging over $600 per unit. But this is just a simple way to illustrate what you could gain and how an FHA loan could benefit you.
Effectively, the benefit of an FHA loan is that it allows you to leverage the bank’s money to purchase an asset without a lot of money coming out of your pocket. 4. Move out in 1 year and Repeat the Process
After a year, you’ll be eligible to use an FHA loan again (although be sure to check your local lender to verify if you can do this as this might not apply in all geographies). This means that you’ll be able to repeat this process by purchasing a property, living in a bedroom or unit, and renting out the other units for a profit.
5. Hire a property manager
Over time, you’ll begin to accumulate multiple properties and tenants if you perform this process correctly. I highly recommend employing a property manager. Remember, the purpose of this strategy is to retire early.
Unless you thoroughly enjoy being on call for repairs or any problems that can occur at your properties, you should certainly hire a property manager to handle any problems that will come up. Most of the time, a property manager will cost 10% of your income from your properties. Personally, I think it’s an excellent fee in exchange for freedom of time.
6. Repeat this process until your Monthly Income exceeds your default spending
As time goes on, you might need more creative strategies to acquire more properties. However, the first step is to get started. Depending on how much your monthly expenses are, this whole process could take a lot of time or it could take a little bit of time. As always, message me if you have any questions.
In hindsight, this process could have been in progress already. I’ve heard of several people relentlessly employing this strategy and retiring in under 5 years. Again, the pace in which you reach retirement will depend on how much you’re willing to work and sacrifice.
I don’t necessarily think you need to abandon everything to “retire”. However, I absolutely believe you should take retirement into your own hands. This is a way to pull that off. Let me know what you think about this article via DM or email.
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