How to Retire Early: The Shockingly Simple Math
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How to retire early - let's break down the steps to early retirement. Enroll in the FREE Personal Finance Principles course: http://courses.videoschoolonline.com/courses/personal-finance-principles/ Take a premium course at http://www.videoschoolonline.com/course-library/ This video shows you how to retire early with shockingly simple math. I've been a personal finance nerd for a while, and the idea of early retirement is really interesting. I'm a huge fan of Mr. Money Mustache who wrote a great article on the shockingly simple math behind early retirement. Since I make videos, I wanted to take his theories and break them down into a digestible video. I hope you enjoy! And like I say in the video, please like and share this video, then leave a comment. What do you think? Is this amazing or crazy? What is your savings rate? What other personal finance questions do you have? I credit a lot of this work/theory to Mr Money Mustache. Read his full article about it here (http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/). Also, check out this cool early retirement calculator (https://networthify.com/calculator/earlyretirement?income=50000&initialBalance=0&expenses=17000&annualPct=5&withdrawalRate=4) Script: Hi, my name is Phil. I’m a video creator and online instructor. I’m also a personal finance nerd. Because of that, I want to create a series of videos that breaks down some of the most mystifying topics that plague our society. In a world where people’s finances are typically locked away and not-talked about, I believe opening up the gates of financial conversation will help everyone live a better and smarter life. In this first video, I want to explain the shockingly simple math behind early retirement - thanks to one of my biggest heroes, Mr Money Mustache. While the ability to retire may seem like a distant and unreachable goal for many, the premise comes down to one thing. You need to invest money so that it earns more money. This could be investing in stocks or bonds, real estate, or any other of investment vehicles. As soon as your investments earn enough money for you to live on each year, you are able to retire. Let’s break it down further to know when you can retire. The most important concept is knowing your savings rate, basically how much you make minus your expenses. If you spend 100% of your income, you will never retire… because you will never be able to invest any money that earns money for retirement. If you spend 0% of your income, you can retire right now… because somehow you are living without needing to make any more money. Between 0% and 100% are a number of savings rates that correlate with the years it will take to retire. For this, let’s assume your annual investment return is 5% (which is conservatively low) and your withdrawal rate is 4%… meaning you spend 4% of your net worth each year. For example, if you have a $1,000,000 net worth, and you live on $40,000. If your savings rate is 10%, you will be able to safely retire after 51.4 years. Safely, meaning you will never run out of money. If your savings rate is 25%, you can retire in 31.9 years. 50%, you can retire in 16.6 years. And if you can somehow save 75% of your income, you can retire in 7.1 years. Now getting to that savings rate might not be easy in our world of societal pressures, keeping up with the Joneses, and bad habits. But you can get closer by making smart decisions, avoiding debt, and living simply. The key take away is… Cutting your spending rate is way more powerful than increasing your income because no matter how much money you make, decreasing your spending will speed up the process. A note, The math behind early retirement works if you are working a minimum wage job or a 7-figure CEO salary. It’s all about the savings rate. So if you want to retire in 10 years, the math tells us that you need to save 66% of your income. Now there is a lot that I didn’t talk about - like how to invest, and how to cut expenses to get to a high savings rate. Those will come in a future video. For now, get excited about the honest truth about retirement (and early retirement at that!)! Let me know what you think in the comments below? Is this exciting or bogus? Until next time… start being money smart. Please subscribe to the channel and leave a comment below! Video School Online: http://www.videoschoolonline.com Courses: http://www.videoschoolonline.com/course-library/ Twitter: http://www.twitter.com/philebiner Facebook: http://www.facebook.com/videoschoolonline
Comments
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abundance mentality = live abundant NOW!....your future is NOW!...
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There's 4 minutes I'll never get back
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I was susceptible of the title of this video. But after I watched it, I was pleasantly surprised. Liked, and Subscribed.
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Apparently, it is a distant goal for the creators of this channel. Not a one of them has secured their retirement, yet.
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you quite obviously have misevaluated the last 15 years in the financial markets. You should shut up and stop putting out bad information that can fuck people over
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The shocking part is where you ignored inflation.
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FUCK retirement!
Work till you die! -
Move to a 3rd world country once you want to retire. You will live happier and won't have to pay BS fees and taxes all the time.
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Instead of stating percentage of income, can you state how much needs to be actually saved per year to financial security at a 6% retrn per year? How much are you considering as financial freedom? $60K/yr? $100K/yr? $200K/yr? I understand it depends on your annual liabilities, but looking at each of the annual retirement income? What would be the minimum savings per year for each income level at 6% return being able to retire in 15 years?
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Where is the math?
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How to Retire Early: Have kids, Wait till kids get income, live off kids
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That's not good enought
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Tai Lopez can eat a jungle full of dicks
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May I ask where are you in the process??
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thank you for the math!
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Simplicity is the way! You;re correct! Well done!
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great video! You should credit the animator/software used thou, whoever did it did a great job.
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rule no. 1 repeat no. 1 get a government job that has the ability to retire in 30 years or less and then will pay you at least 63% of your income and has health coverage. rule no.2 save as much as you can but no less than what will result in enough to cover the difference of retirement payment and what you need (I recommend close to 100% of preretirement income). rule no. 1 is because most every business doesn't and only at best allows a 401k or nothing
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One thing I have come to appreciate more and more in life (I'm 36) is that everything in the world is a paradox. Turn everything- literally EVERYTHING- on its head, to be truly contrarian. So for example, if the masses prophesise that everyone needs to save 10% of their income, I will turn this on its head and aspire to save 90% of my income insead. There are very few people capable of this, but if one is smart enough it is possible. But that is the beauty of being Contrarian - by definition only a small percentage can do it.
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but what is this math based on 1200 a month?
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