Category Archives: RETIREMENT

How HS retired at just 28 yrs with millions of dollars after growing up in poverty

My parents grew up poor. Eight-people-living-in-a-one-room-apartment poor. Food-stamps poor. “You’re a busboy, and maybe one day if you work really hard you’ll move up to being a waiter” poor.

Keeping six key principles in mind can help you retire early.

When I was a kid, my parents constantly emphasised how important financial freedom would be, and what one must be willing to do to achieve it. I eventually retired early, at 28, with a little over $US2 million. My entire career totalled less than seven years before early retirement.

Here are six building blocks that helped me get to multimillionaire status quickly.

Average habits lead to average outcomes — if you want an above-average net worth, you need to make above-average efforts.

The median retirement age in the US is 63. The median net worth of households age 65 to 69 is $US193,000 ($272,000). Between that and the average Social Security, that means the average retired couple has to live on less than $2,000 a month.

If that doesn’t sound appealing to you, then you’ll have to do better than average.

While it sounds obvious, this is actually a game-changing thought. To retire early and enjoy atypical wealth, you will be employing strategies that most of your friends probably don’t use. You will be investing your money differently. You will be living differently. And that’s OK. It’s to be expected.

Information is the key to riches

While a certain amount of effort and discipline is required to amass wealth, the biggest distinguishing factor is knowing where to apply that effort. What we pursue is limited by our knowledge of what’s out there. The difference between two people with the same circumstances but different knowledge of their opportunities can easily be a million dollars. A few examples:

  • I discovered that graduating from college in three years instead of the usual four could completely pay for retirement. Between the cost of a year’s worth of tuition and the value of one year’s worth of income, the swing in my net worth was over $US1 million if I set it aside and let it grow until I was 55. In other words, knowing about and employing that one strategy could pay for my entire retirement.
  • I’d just had my first child and have started thinking about how I could set him up for success. Did you know that the average family can make their child a millionaire? The strategy doesn’t even require them to find more money in their budget, just to deploy it differently.
  • Americans have $US4.2 trillion in actively managed equity mutual funds, which could probably be deployed differently for better returns. According to Dow Jones S&P Indices’ Scorecard, passively managed index funds outperformed 82% of their actively managed peers over the 15-year period. Not only that, but the fees charged for a passive fund are significantly lower.

Between fees and superior performance, it’s very likely that moving your investments from one to the other could improve your returns by at least 2%. Did you realise if you invested a $US200,000 portfolio in low-cost index funds rather than high fee mutual funds, historical performance would suggest you would make $US600,000 over the course of 20 years? No additional work for you – just an hour or two to research and make the decision. That’s $US600,000 of lifetime value for two hours’ work.

The right small effort, applied today, can yield six figures in the future.

So how do you ensure you’re in the know about the best opportunities? We have never lived in a better age for this. The advent of technology allows us to reach well beyond our normal circles and get exposure to the best, most impactful ideas globally. You can build a system to regularly show you the best ideas, and let those ideas stack on top of one another to grow your wealth for you.

Career skills and career-management skills aren’t the same thing

Earning an extra $20,000, $30,000, or $100,000 a year is a lot more achievable than you think.

Career management – figuring out how to position and improve yourself for the fastest promotions and highest compensation – requires a set of skills very few people invest in. All the talk is about the technical skills required to perform one’s job. Obviously, you need to be competent in your role, but the skills that make you a good accountant are not necessarily the skills that will help you land a great job as an accountant or get the highest raise once you are an accountant.

An accountant has to have good knowledge of the tax code. She has to be detail-oriented and independent. The additional skills necessary to land a role as an accountant are emotional intelligence, initiative, networking, and negotiation. And these are completely different.

The job I held was a highly competitive one. Before my first interview, I reached out through friends of friends to try to find someone who was already in the industry who would spent 15 minutes talking on the phone with me.

After I did this, I cold-emailed someone at the firm I was interviewing with to do the same thing, hoping that I could get a little background on their specific style and adjust my approach. Turned out the gentleman I spoke with ended up being one of my interviewers, and he told me after I got the job that he’d spoken highly of my initiative in contacting him to prepare.

I also picked up a lot during my career about what levers influenced compensation the most. Things like knowing what to look for in an employer and how many years you want to stay at each company for maximum income are factors which will help you achieve 30 per cent-plus annual pay increases.

You can earn as much outside of work as you do at your full-time job

We live in a technological age. The opportunities to build a side hustle have never been better. Not only will they kick in extra income, but if you build a successful side business, it can easily become your main source of income with the added flexibility of working from anywhere around the globe.

I came to this one later than I would have liked: It was only after I retired that I realised I had underestimated the possibility of income during retirement and thus worked more years than I needed to because of it.

After I retired, I started a blog about personal finance. It was meant to be a hobby – it’s a subject I love. It became a passive income stream sort of by accident. In its first full year it made $US62,326 with only five hours of writing a week.

Having a job on the side can help you get out of the daily grind earlier. Credit:Josh Robenstone

It so happens that blogging could be a viable, lucrative side hustle for many folks. For one thing, the start-up cost is small, maybe $30 to $40 for hosting a year. And it’s an extremely horizontal business model – almost any subject can eventually become a profitable blog. There’s a fitness blog that makes the couple who own it $145,000 a year. A blog focused on entrepreneurs that makes $3 million a year. A blog on food recipes that makes $1 million a year. You’ll find breakdowns of how much bloggers can make over here.

If blogging isn’t your style, there are a million other options you can pursue. Perhaps you can submit your photographs on a stock-photo marketplace like iStock. You can host dogs in your home for $20 to $50 a night through Rover. Maybe you’re an accountant who wants to teach small-business owners the basics of handling their books through paid courses on Udemy.

While some side hustles are more lucrative than others, there will certainly be at least one option that fits your skill set and interests that could make you $US20,000 to more than $50,000 in a year in your side hours.

Earning more requires its own set of skills. If you spend even a little time thinking in this mindset, you will vastly outrun the average guy, who spends next to no time on these skills, and you will be rewarded big time for it.

Money begets money

The difference between having no money and even a little money is staggering. I remember reading an article about why those in poverty find it hard to save. One example the article used was about how someone might go to the store and not be able to afford buying in bulk. Certainly they can see that buying one roll of toilet paper is more expensive per unit than buying the 24-pack, but they don’t have the extra $US10 to “invest.”

This is a small example most people understand, but the principle applies at nearly every incremental increase in wealth.

  • If you’re not scrambling to get your bills paid, you might be able to consider taking on a side hustle for five hours a week. That side hustle might blossom into a six-figure paying business that allows you to travel the world while working only four hours a week.
  • If you have $US50,000 tucked away in savings, perhaps you can afford the down payment on a home so you can buy and build equity with your monthly payments rather than giving it all away in rent.
  • If you have $US100,000 or $US200,000, many banks and brokerage companies will offer you special incentives like lower trade costs and higher sign-up bonuses worth thousands of dollars.
  • If you have a million dollars, you are considered an accredited investor. You can invest in private-placement opportunities. You can be an angel investor in a startup and back commercial real-estate development projects. Your assets qualify you for a larger mortgage, which allows you to buy multi-family properties, which generally show higher returns than single-family rental homes.

In short, more money means more options open up to you. Better options. The more money you have means you accelerate faster and faster toward massive wealth. Money begets money, so it’s worth the hard work and sacrifice to build that first small nest egg.

One of the most recent examples of this in my own life is using my accumulated wealth to get a discount on my mortgage interest rate. When we bought our home, I spoke with the private client arms of some of the major banks. A common benefit of being a private client is a discount on your mortgages. All I had to do was transfer a chunk of my buy-and-hold stocks into an account stewarded by them in order to qualify.

What’s more, there was no time limit as to how long I had to hold my assets with the private arm. Simply having these accumulated assets got me a discount that was worth $US300,000 over the life of the loan. Those same accumulated assets allow me to regularly take advantage of brokerage sign-up bonuses. By moving my money twice a year, I make $US4,000 for two hours of work.

Do everything you can to accumulate that first $10,000, $20,000, or $100,000. It will create a snowball that speeds you toward wealth far faster than you can imagine.

Kickstart your journey to wealth by tracking your net worth

Say you’re interested in accelerating your financial progress and overwhelmed with all the possibilities you can pursue. What’s the single best thing you can do for yourself in the next five minutes? What can you do right now?

Keeping track of your expenses is key to taking control of your financial future.

Simple. Start regularly tracking your income, expenses, and net worth.

If you think about every engaging thing you’ve done, they probably had some way to measure your progress. How many goals you scored. How quickly you can complete a set of problems.

Personal finance is no different. You improve what you measure.

You need to be able to track your income, expenses, and net worth. It needs to be staring you in the face every day. Once you start seeing these key metrics improving regularly, it will spur you to dig into the details and find opportunities to grow it faster.

I use Personal Capital to track all of my finances. Their dashboard is free, accessible to you anywhere, and it hooks up to all your different accounts to give you a single pane of glass from which to view your financial life. It also imports as many months of data as your credit cards and bank statements allow, which will enable you to immediately dig in to spot trends in your past behaviour and opportunities to improve. But even a good old spreadsheet would be a vast improvement.

If you do nothing else today, start tracking your key metrics of income, expenses, and net worth. It will show you where the opportunities lie to improve your financial picture. It is the cornerstone habit that helps build momentum for all the other things you do to grow your wealth. And every new strategy you collect on the way will be reflected in your dashboard’s progress charts.

Do these things and you will find that you, too, can retire decades earlier than your peers.

JP Livingston writes about early retirement, money, and investing on her blog The Money Habit.

This story first appeared in Business Insider. Read it here or follow BusinessInsider Australia on Facebook.


Henry Sapiecha

More Australians than ever will work past 70 as they are too poor to retire @ 65

What to do if the Budget cracks down on super tax breaks

It’s looking very possible that the Federal Government may take the axe to superannuation tax breaks in the upcoming Budget, so it’s time to look at your options.

More Australians than ever before intend to work beyond 70, as Generation X-ers and Baby Boomers fear they lack the financial security needed to retire any sooner.

The findings, which come as the Turnbull government weighs superannuation reform in the May budget, have sparked fresh concerns that a comfortable retirement is now “out of reach” for hundreds of thousands of low-income earners.

An analysis of Australian Bureau of Statistics data shows the number of over-45s who say they will not retire before turning 70 has dramatically increased, from 8 per cent to 23 per cent in a decade.

Childcare worker Kerrie Devir has worked for almost 35 years continuously, but has less than $100,000 in superannuation image

Childcare worker Kerrie Devir has worked for almost 35 years continuously, but has less than $100,000 in superannuation. Photo: Paul Jeffers

Seniors groups say the figures indicate people are ageing in a much healthier way and want to keep working, but also reveal deep “financial uncertainty” among older workers following a series of superannuation and pension changes

Retirement before 70 is “out of the question” for Melbourne woman Kerrie Devir, who has worked in childcare for 33 years.

“When I look into the possibility of retirement, it’s a financial train wreck of massive proportions,” she said.

abbott & turnbull together image

‘Incredibly cruel and short-sighted’: United Voice – the union representing some of the country’s lowest-paid workforces – said the findings were an indictment on former prime minister Tony Abbott’s decision to freeze an increase to employer super contributions. Photo: Alex Ellinghausen

“Because my wages have been so low and continue to be so low, superannuation just doesn’t build … Nine per cent of a very little amount is still a very little amount when you retire.”

Ms Devir said she had accumulated less than $100,000 in superannuation, despite having worked continuously since she was 17.

And with the rising national life expectancy, Ms Devir, a single woman, said she was worried she could be forced into poverty after she is no longer physically able to work.

old couple walk on path image

With Australians living longer, there are concerns about how much money is needed to fund a long retirement. Photo: Glenn Hunt

“On my mother’s side, I have longevity, on my dad’s side I don’t,” she said.

“I’m not sure that I want my mother’s longevity … that’s not going to play out very well for me.”

According to the ABS, the most common factor influencing people’s decisions on when to retire was financial security (40 per cent of men, 35 per cent of women).

This was followed by personal health and physical abilities (23 per cent of men and women) and reaching eligibility age for a pension (13 per cent of men and women).

United Voice – the union representing some of the country’s lowest-paid workforces – said the findings were an indictment on former prime minister Tony Abbott’s decision to freeze an increase to employer super contributions, which had been scheduled to reach 12 per cent by 2019.

“This was incredibly cruel and short-sighted and will have a devastating impact on workers,” union state secretary Jess Walsh said.

“It is no surprise that more and more people are delaying their retirement.”

Ms Walsh said the pension was clearly “not keeping up” and Australians were finding it harder to accumulate enough superannuation to top up the pension to a reasonable level.

She said the value of the minimum wage had gone backwards nearly 10 per cent in two decades, making it even harder to accumulate enough superannuation.

“Our members work hard, they pay their taxes, and yet they can’t afford to retire with dignity.”

National Seniors chief executive Michael O’Neill said the new statistics revealed the “longevity penny has dropped” for people in their 50s and 60s, who were worried they won’t have enough money to fund a long retirement.

“People are saying, ‘I thought I was going to live until about 75, but now it looks like I could be living a lot longer than that … can I afford it?” Mr O’Neill said.

“Longevity has started to become a real issue.”

Mr O’Neill called on the federal government to provide “much greater clarity” about retirement income, including superannuation and the pension.

“People need certainty about what benefits will flow over time … and all the speculation around superannuation causes people uncertainty because they don’t know where it is going to land,” he said.

“And the government needs to stop talking down older Australians, and instead celebrate the fact that they are significant contributors and want to work longer.”

Henry Sapiecha