How to Retire Early: The Shockingly Simple Math



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

  1. great video! what program do you use for editing?
  2. Wtf people? Why on earth do you consider retiring early? I only hope that I can work until the day I die.

    You know retiring early also means dying early right?
  3. this is a good vid thanks. im a believer in MMM's advice.
  4. Video ignores the future of automation and the the shrinking middle class. 80% of the population has 7% of the wealth in USA.
  5. The honest truth is most people now will not be able to retire. Why? Because you are forgetting one big factor called Inflation. Anything you invest MUST outperform inflation and this is near impossible to do when Federal Reserve is in control and manipulating the supply of the money. We are not living in our grand parents generation when currency is backed by gold and Fed is limited in money printing. Fed can hit few keys and make trillion dollars in seconds, and they don't even have to wait until printing press to pump it out. I kid you not, when money velocity picks up retirement would be the last thing people will be worrying about because they would be too busy trying to pay for daily expenses.
  6. Love the video series. Grow that 'stache!
  7. yes just invest in stocks and bonds and realestate, you Will be left with NOTHING werry SOON! Great tips!
  8. yeah but Mr. Money Mustache is a fraud, a total fraud!!!!
  9. My daughter is in 5th grade and told me last week her class was working on investing money they were broke up into groups her group chose Apple and google. She came home and said mommy you know how you are always looking at the market did u know google makes more money than Apple 😳I said what🤔
  10. Not sure a 5% return is low in fact when interest rates are near zero 5% could be considered high.
  11. Thank you for the awesome video!
  12. hai im from indonesia, your video is very good
  13. I really believe what you are saying is absolute true. I started paying for my retirement at age 25. The earlier you start, the better off you will be. I paid my house off in 6 1/2 yrs. I saved enough in interest to do a total renovation. I retired recently and I am living pretty good. If you are young, start saving today, so you can enjoy tomorrow. I am by no means bragging, I am just saying what he said in the video is true.
  14. I'm "retired" at 35, due to real estate. The key is to live for free or as close to free as possible, then invest all or most of your income.Example: Buy a cheap house, fix it up, rent the rooms out. Get paid to live in the house, borrow against the house to buy more homes.
  15. my strategy, im 16 and still in highschool(yes, because i live in asia) i dont use my money to buy anything at school (except books and other thing that i use to get better at school) i place my money on stock because only 0.2% of total population in my country are put their money on stock, so i think if i place my money now, it will growth faster. there are 15 stock recommended for me, and 1 of them has 55% interest/year. so i want to retired at 35 and i will start stock trading with all my money on the stock.
  16. Ridiculous, basically stay at home spend nothing and then maintain that lifestyle till you die.. no thanks
  17. Start an LLC & buy everything on credit. Then write it off as corporate expenses lol
  18. the math doesnt you that you could speculate on opportunities in life...saving a lot of your money could mean a lot less chances of meeting your opportunities tbh
  19. This worked when saving accounts paid in excess of inflation. This is no longer the case.


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Duration: 3m 43s

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