You Can Retire Early


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Retire SunsetHow do you think about retirement? Is it something that’s too far off to worry about, or too close to deal with? Is retirement something you feel ready for or scared about? Do you want to retire early or will you have to work longer than you want?

In yesterday’s post I wanted to turn the cliché “Money is the root of all evil” on its head and I came up with some suggestions such as money is the root of self-confidence, independence, and security. The fact is, money is a means to an end, it’s just a tool to use.

Retirement is thought of as an escape from work, from responsibilities, from the rat race or the grind, but retirement is none of those things if you are ill prepared without enough resources, otherwise known as money.

I know that early retirement will be a reality for me (whatever retirement means for someone who asks What Next). But what is early retirement? If 65 is “normal” retirement is 60 early? How about 55 or 50? My goal is 50 but is that really possible? And how?

The answer is yes it’s possible and I present “Super Saver” as exhibit A. Super is a blogger who retired in his 40s and, as I indicated yesterday, he didn’t use any get rich quick schemes, there were no tricks, and he doesn’t have a system he’s selling to teach you how to do it.

There are three key points to how Super retired so early and how I plan on doing the same: First, he started young and got a good education in a field with potential for good income. Not every career has the same potential for high income but you have to accept that fact if you choose to take a job because you love what you do rather than for the money. As a student you should also think twice about how much debt you’re willing to take on for a job that doesn’t pay well.

Second, he knew that hard work in the short term would lead to options in the long term, he was able to advance in his career getting raises and promotions along the way. I, too, have worked long hours and pushed hard to achieve certain goals at work but I know I won’t be doing this forever.

Third and probably most important, he was able to restrain himself and live significantly below his means. No matter how many times people hear this advice, live below your means, they simply don’t listen. Yes my wife and I have a very good income but we also save a large amount. Super says he saved 10% of his income in the early years but I don’t see how much he saved later. Julie and I save an astonishing 27.7% of our income, on average, over the last 6 years.

Wealth Builder PostsSuper wrote an excellent series of posts recounting exactly how he was able to retire in his 40s and I highly recommend reading all 10 posts.


So many people ask, wonder, and dream of retiring early without realizing that they have the resources to do it if only they were willing to give up some immediate pleasures for the future promise of their dreams.

It comes down to choices. Do you have what it takes to make the right choices now for a better future?

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Are You Crazy???

StraightjacketI’ve heard it said that the definition of insanity is doing the same thing twice and expecting a different outcome. I can add to that. My definition of insanity is knowing you’re on a road to nowhere and staying there. That is what 60% of US workers are doing. These are people who are not asking what next, who aren’t willing to take simple steps to secure their future.

I wish it were possible for you to hear me scream in a blog post. START TAKING RESPONSIBILITY FOR YOUR FUTURE. Apparently people are much too concerned with the present to think about the future. My post yesterday was about taking opportunity when it’s available but maybe you need me to be a little clearer. You’re an idiot. That’s right I just called you an idiot and, like the classy Governor of NJ, I’m standing by my statement.

Why am I so angry? A new report from the Employee Benefit Research Institute (EBRI) states that 60% of US workers have less than $25,000 in savings and investments. People talk about welfare recipients like they’re a drain on society, well wait till the fools who only have $25,000 saved toward retirement get too old to work!

Success comes when you take action now for a benefit in the future, but according to the study, “instead of saying I’m going to save more today, they just say I’m going to defer my retirement age once I get to 65.” Are you kidding me? Yeah, that’s a great plan, right up there with playing the lottery or praying for a million dollars.Lottery Ticket

The other number that is pathetic is that only 14% of the people surveyed feel very certain that they will have enough to live comfortably in retirement. But apparently 100% aren’t willing to do a damn thing about it. There is no way to escape the fact that you are the only one responsible for your future. 

The survey does not include the value of a person’s home – which is a good thing since a lot of these people, even so called experts, probably used their homes as ATMs contributing to the housing collapse. The other thing the survey doesn’t include is the value of any traditional pension plans the respondents may have. I say “may have” because most don’t know if they do. Although 56% expect to get a pension only 33% say they have one! Was I being to harsh with the name calling?

I do not include my pension or social security in my projections for retirement. If I’m not comfortable without that money then I’m not saving enough – boy am I in the minority here! According to the St. Louis Fed the personal savings rate for 2012 is 4.6% but compare that to my personal savings rate for 2011 of, brace yourself, 32%.

I’ll admit it’s easier to get the savings rate up when your basic necessities are met but it goes far beyond that. I could easily afford an iPhone or iPad or both but I didn’t buy those because they are not a necessity. I could have an HDTV in my bedroom but I rarely watch television there and that would increase the cost of my Direct TV service. These are the choices we make in order to get up to that high savings rate and it is the reason we are so far off the charts in our savings and investments and why we have so many options.

Are you asking what next or are you coasting? With the steep incline of retirement looming, coasting won’t take you very far. What are you doing to plan for the future?


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Right but not Perfect


How do I do this? How do I write a post called “Right but not Perfect” without sounding like a jerk, like an egotistical self-centered idiot? Well, I don’t know that I can. You have to have a certain amount of all of that in order to put yourself out there and say “I have answers.” If I’m going to criticize others I better be able to back that up, otherwise I am a jerk.

Anyone offering advice, be it financial, personal, business, or otherwise, is saying “I know better than you.” That’s ok because sometimes they do, other times it’s just a second opinion, a different perspective than you have.

Financially speaking I’ve done well. I’ve made mistakes but they weren’t catastrophic, they didn’t do irreparable harm, or really any noticeable harm. I’ve been right about a lot of things such as the housing bubble but I was also wrong about the housing bubble too.

What? I was right and wrong? Yup, and lucky too.

I’ll start with a big mistake that could have had serious ramifications. When I got my first job out of college I immediately went out and bought a Jetski. Jetski 750SXThis could have been the start of a reckless spending spree, a lifestyle I couldn’t afford but it wasn’t, because I made a deal with myself. I told myself I would buy the Jetski but save aggressively after that. I stuck with my plan!

In 1995, at the age of 25, I bought my first home, a townhouse. My aggressive savings paid off and so did my parent’s help, letting me live in their house rent free. It happened to be pretty much the bottom of the market. That was just luck. I had a roommate to help defray the costs, that was smart. In 1997 my girlfriend, Julie (yeah she’s my wife now), moved into my townhouse because the home she owned (purchased when she was just 23) had burned down, that was really bad luck.

House FireWe invested part of the insurance money as the house was being rebuilt and doubled it. Partly luck, partly good judgment, it was a highly risky move but it paid off. We didn’t go overboard when the house was completed, buying furniture and expensive electronics, we were frugal, we lived well below our means, something that continues to this day.

In 2000 we bought our first rental property at the Jersey Shore. I thought it was the height of the market, that home prices couldn’t go up any more, that was dumb. As prices continued to rise I could have cashed in but I didn’t. I was right in 2005 when I wanted to sell and wait until prices crashed to buy again but I didn’t. Was it a mistake? Maybe but I’m not going to complain about a successful investment because it could have been more successful.

When it comes to stock investing I’ve done well, too, but made serious mistakes. Not one, not two, but three stocks I owned have gone completely under. I lost everything I invested in them but I knew the risks and didn’t lose my shirt. I had a comparatively small percentage in each stock. As the saying goes, I didn’t put all my eggs in one stock basket. Again, I had a plan and I stuck with it. Those losses caused me to completely rethink my investing strategy and now I subscribe to what is known as passive buy and hold investing (though I think passive is a misnomer).

My second rental property has lost value, a substantial amount of value. Here again this could be considered a mistake but once again I knew the risks. I wasn’t trying to time the market, to buy at the bottom. I assessed whether I could afford it, whether I would make money in the long term, not the short term. If that meant I had to hold it for 5, 10, 15 years or more I was ok with that. I had a plan and I stuck to it. I’m three years into the investment and it looks like it will be closer to 10 years that I’ll need to hold onto it. That’s fine.

I haven’t been perfect but no one is. I’m satisfied with how things have turned out so far and I’m looking forward to the future. All I can do is give you some insight into my success and my failures and let you be the judge of whether I’m someone who can offer you anything worthwhile. 

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Stalking Your Money

Being successful simply is not possible if you don’t have your finances under control. I’ve said it before and I’ll say it again, success is not determined by how much money you have, there’s a lot more to it than that, but how you use the money you have plays a big part in success. If you’re playing catch up but never make progress, are in debt, or simply don’t know where your money is going, you’re putting yourself at a disadvantage.

In a previous post I made it clear that budgets often don’t work and that you will be much better off if you tracked your spending. If every transaction is accounted for then your budget is taken care of. You know exactly where your money is going and how to make adjustments.

The video below is a follow-up to a previous video and will show you how to use Quicken personal finance software to begin keeping track of your spending. If there is anything you resolve to do in 2012 make it tracking your spending. Here’s to a very happy and successful New Year.

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Spending Vs. Budgeting

An important part of success is money. I’m not saying that we all need to be millionaires but managing your finances is an important part of success. Many people struggle with their finances because they either underestimate the difficulty, thinking it’s so easy to manage their money that they end up getting into trouble, or they overestimate the difficulty of their finances, thinking it’s too hard to figure out, and also end up getting into trouble.

The real problem with managing your finances is simply knowing where your money is going. It’s not a budgeting problem, it’s a tracking problem. If you know where your money’s going you’ll be able to see in what areas you’re spending too much, what areas that need to be reigned in. If you aren’t keeping track of your spending you’ll just wonder why you don’t have enough, you’ll wonder where all your money’s going.

The video below has been permanently added to my video page. More will follow.

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What does coasting mean to you?

Girl describes coasting as “Being in a point of total relaxation, when everything seems to be going your way.” Be careful of the word – seems. Using “seems” indicates only the appearance or the impression that everything is going your way, but it might not.

I’m not a fan of coasting in life as I’m sure you can imagine based on the title of my book, What Next. Asking What Next is the opposite of coasting. In the chapter called, appropriately enough, Coasting, I present my case. The quote I start the chapter with succinctly captures my problem with the word “if you are coasting you’re either loosing momentum or you’re heading down hill.”

While everything might seem like it’s going your way, coasting only lasts so long, then the twin effects of friction and incline take their toll as your momentum is reduced. This doesn’t mean you have to keep the pedal to the floor at all times, you can and should let up, but it means that too many people haven’t used the gas in a long time.

Friction is barely noticeable as you coast through life. Maybe your savings is reduced bit by bit, hardly enough to make a difference right? Maybe your retirement savings aren’t as big as they could be, but that’s a long way off. Maybe your relationship with a spouse or partner is becoming mundane but you love each other so it’s all right.

Then bam, a hill appears out of nowhere and coasting isn’t enough any more. You lose a job, your investments take a nose dive, or your relationship takes an unexpected turn. Building up the momentum to get over the hill won’t be easy as the effects of the friction become painfully apparent.

Are you coasting? Is that a problem?

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