How To Live off 35% of Your Income & Retire by 40

In the age of Silicon Valley, a lot of us dream of launching the next Warby Parker, Instagram, or Airbnb—a wildly successful business that will leave us financially set for life. But the game is kind of rigged. Research says that, on the whole, entrepreneurs aren’t the fearless, high-achieving heroes we imagine them to be. They’re just rich kids—people with inherited wealth and safety nets who can afford to take risks that would bankrupt the rest of us. A 1998 paper published in the Journal of Labor Economics concluded, “individuals who have received inheritances or gifts are more likely to run their own businesses.” And economist Ross Levine told Quartz last year that the chances of becoming an entrepreneur “drop quite a bit” when your family isn’t loaded.

But those of us born without trust funds need not cry into our IPAs. What if, instead of going into business to get rich, you got rich so you could go into business? Take Peter Adeney, better known as the blogger Mr. Money Mustache. Adeney initially won Internet fame because he “retired” at age 30. Working as software engineers, he and his wife, Simi, saved and invested their income until they’d amassed a nest egg of about $700,000. At that size, their small fortune could generate returns substantial enough to live on. So Adeney quit his job and set about doing, well, whatever the hell he wants. He’s since become the face of the early retirement movement—sometimes referred to as FIRE, for Financially Independent Retired Early—and inspired thousands of people to follow in his footsteps.

retire

I’m one of them. For the last five years, my husband and I have been using Adeney’s basic blueprint so that we can retire decades early, too. And we’re in good company. Mr. Money Mustache now racks up around 750,000 unique visitors and about seven million page views a month. Like Adeney, I don’t conceive of retirement as endless leisure. Forty years of golf and reruns would turn my brain into applesauce. To my mind, the most interesting thing about Adeney—and his relevance for would-be entrepreneurs—isn’t that he retired so young. It’s what he’s done with his retirement. Namely, as he explains on his blog, “the Mrs. and I started a cozy new two-person company that does whatever we want it to do.” So far, that’s included carpentry projects, building and selling a house or two, and the Mr. Money Mustache blog.

It’s almost as if Adeney built his own trust fund and turned himself into a rich-kid entrepreneur. Some of his achievements are directly attributable to the fact that he didn’t need that business to generate a profit in the short term, or even much of a profit in the long term. Adeney’s success as a blogger has been expressly built upon his financial independence. It gave him his subject, for starters, and allowed him to write in whatever tone he wanted, instead of catering to advertisers. Readers took to his irreverence—and no wonder, when most personal-finance writing is gratingly chipper and seems like filler in between credit-card ads.

Readers could also trust Adeney, knowing that his advice wasn’t contingent upon what would fatten his own bank account. While this kind of personal credibility probably should be de rigueur for a money guru, it’s still more the exception than the rule. It’s not a great big leap to say that Adeney ended up making around $400,000 a year from his blog in large part because he didn’t need to. The advantages don’t stop there. His self-built trust fund also insulated him from the brutal realities of the online media business, in which Google and Facebook scarf up around 90% of new ad dollars and many fledgling outfits crash and burn. He’s also been able to take breaks and work on the blog when he wants to, rather than adhering to the sort of ruthless schedule many entrepreneurs are stuck with.

I totally get that saving up your retirement nest egg decades early might seem like an even tougher dream to realize than just going ahead and starting your business. Judging by the “Mustachians” who post and comment on the site, the demographic appears to be reasonably high-earning folks with naturally frugal tendencies. Not everyone is in a position to save and invest, of course. A single person earning $70,000 in New York might not have much left over after taxes, rent, food, and the odd late-night Uber. A married couple in Cleveland earning $200,000 (nearly four times the median household income, let it be said) probably wouldn’t find this tactic very difficult at all. Such high-paying jobs are very much the exception, not the rule—and that’s to say nothing of those who can’t find jobs at all.

Personally, I’m not exactly frugal—I just prefer to live like a grad student because it keeps life simple. Right now, my husband and I live on about 35% of what we make, net. We earn more than we used to, but we’ve been able to avoid lifestyle creep because our tastes haven’t shifted much and certainly haven’t improved much. (We splurge on food and travel. But we still drink $6 wine, buy used books, and get t-shirts from Uniqlo, none of which I regard as any kind of sacrifice.) In business, you’d call this operating leverage. Market willing, we should be able to retire in five years, when we’re 39 years old. Then we’ll start a company that “does whatever we want it to do.”

So how much money are we talking? To size your nest egg, you calculate your yearly living expenses and multiply them by 25. Then you invest and use the magic of compound interest to help you reach that goal. (Adeney suggests index funds—simple, low-fee investment vehicles that typically track the returns of the stock market.) Once you’ve hit your number, you withdraw funds at a rate of 4% a year, known as the Safe Withdrawal Rate. A $1 million nest egg, for example, would yield $40,000 each year. A $2 million nest egg would yield $80,000. Simulations of model portfolios suggest this rate allows for lifelong withdrawals in nearly every market scenario. That means that you should still have money left at the time of your death, even 30 or 50 years hence.

I’m aware that the tone of this advice could seem money-obsessed or money-grubbing. But I don’t say it out of the conviction that the world’s already abundant supply of rich jerks needs adding to. (Parts of this article were written on January 20th, an auspicious day for rich jerks everywhere.) Rather, I think the dream of financial independence is worth chasing because I’m convinced that freedom is one of the worthiest goals around. If you’re a person with big-time creative dreams, it would be a tragedy straight out of Arthur Miller to spend your life working for someone else—or waiting around for the world to change. We seem to be decades away from instituting a universal basic income. So it might be time for you to try to DIY one.

Rich kids may dominate the entrepreneurial landscape. But over time, you could become one of them yourself—a person for whom many of the usual risks don’t apply.

  • QZ

+++

3 Career Tips for Millennial Women

millenial woman
Photo courtesy of Pixabay by Janeb13

It’s official: millennials have already surpassed the number of Gen Xers in the workplace. By 2025, millennials (those born during or after the 1980s) will account for roughly 75% of the workforce. More than half of that number will be millennial women.

Are you one of the millions of millennial women who will be starting your career this year? If so, here’s some advice for young women entering the workforce for the first time:

Tip #1 – How to ensure your career advancement

What are your long-term career goals? Whether you plan to climb the corporate ladder or run your own business, it can be helpful to find a mentor. Think of a mentor as a loyal, wise advisor who will offer advice, answer your questions, cheer you on, and steer you towards a path of long-term success. If you live in the United States, your local small business association can help recommend mentors for starting a business. If you work for someone else, you can probably find a trusted colleague or coworker who is willing to mentor you.

Remember to take advantage of available resources. If you can’t afford an opportunity, get creative. The Silver Spoon Foundation, for instance, is a nonprofit providing peer-funded scholarships to “young and driven” millennials looking to attend career advancement conferences and networking events throughout the United States. Some conferences, like Emerging Women, offer free attendance in exchange for volunteering your time to help with the annual event.

Tip #2 – How to navigate sexism in the workplace
If, at some point, you encounter the almost inevitable sexism in your career, there are ways to handle it like a (lady) boss. Remember that sexism is usually subtle. Even the most family-friendly and forward-thinking organizations might occasionally hire people who engage in sexist behaviors. And sometimes, even the most progressive and well-meaning co-workers might accidentally make an unintentionally insensitive statement.

Fighting sexist comments doesn’t always mean you have to boldly call someone out or report them to human resources. Sometimes, it can mean calmly educating them with the facts. According to Huffington Post writer, Emma Gray, “Statistics can be your verbal karate. Anytime somebody tries to argue against this stuff, I just try to hit them with data.”

If it would be helpful to have some support during this process, find a Feminist Fight Club or a group of trusted business women you can turn to in your local area. (Pro tip: if there isn’t a group like this in your area? Start one! If you can’t get people to meet in person, Facebook groups can work wonders!)

Tip #3 – How to crack the ever-present glass ceiling
There is a definite pay gap between men versus women working the same job. Luckily, millennial women face less of a wage gap than women of any previous generation. You can continue this positive trend by asking for more money, practicing assertiveness, and being open to negotiating pay. You can further work to crack the ever-present glass ceiling by climbing the corporate ladder to earn a leadership position in your company. Or better yet – you can branch out as an entrepreneur and start your own company.

It’s an exciting time to be a millennial woman. As you enter the workforce, you are starting your career during a time when your generation is redefining what it means to “have it all.” You can choose whether you want to work for the institution or work for yourself. You can choose what your work-life balance looks like. You can even redefine gender roles in the workplace and show the world what it really means to be a “lady boss” in 2017. What groundbreaking things will you accomplish in your career this year? Only time will tell, but if you’re reading this article, then you’re clearly motivated and are probably off to a good start.

  • Dean Burgess (Guest Post Contributor)

+++

The Most Crucial Thinking Skill – Inversion

The ancient Stoic philosophers like Marcus Aurelius, Seneca, and Epictetus regularly conducted an exercise known as a premeditatio malorum, which translates to a “premeditation of evils.” The goal of this exercise was to envision the negative things that could happen in life. For example, the Stoics would imagine what it would be like to lose their job and become homeless or to suffer an injury and become paralyzed or to have their reputation ruined and lose their status in society. The Stoics believed that by imagining the worst case scenario ahead of time, they could overcome their fears of negative experiences and make better plans to prevent them. While most people were focused on how they could achieve success, the Stoics also considered how they would manage failure. What would things look like if everything went wrong tomorrow? And what does this tell us about how we should prepare today?

This way of thinking, in which you consider the opposite of what you want, is known as inversion. When I first learned of it, I didn’t realize how powerful it could be. As I have studied it more, I have begun to realize that inversion is a rare and crucial skill that nearly all great thinkers use to their advantage.

inversion

How Great Thinkers Shatter the Status Quo

The German mathematician Carl Jacobi made a number of important contributions to different scientific fields during his career. In particular, he was known for his ability to solve hard problems by following a strategy of man muss immer umkehren or, loosely translated, “invert, always invert.” Jacobi believed that one of the best ways to clarify your thinking was to restate math problems in inverse form. He would write down the opposite of the problem he was trying to solve and found that the solution often came to him more easily. Inversion is a powerful thinking tool because it puts a spotlight on errors and roadblocks that are not obvious at first glance. What if the opposite was true? What if I focused on a different side of this situation? Instead of asking how to do something, ask how to not do it. Great thinkers, icons, and innovators think forward and backward. They consider the opposite side of things. Occasionally, they drive their brain in reverse. This way of thinking can reveal compelling opportunities for innovation.

Art provides a good example.

One of the biggest musical shifts in the last several decades came from Nirvana, a band that legitimized a whole new genre of music—alternative rock—and whose Nevermind album is memorialized in the Library of Congress as one of the most “culturally, historically or aesthetically important” sound recordings of the 20th century. Nirvana turned the conventions of mainstream rock and pop music completely upside down. Where hair metal bands like Poison and Def Leppard spent millions to produce and promote each record, Nirvana recorded Nevermind for $65,000. Where hair metal was flashy, Nirvana was stripped-down and raw. Inversion is often at the core of great art. At any given time there is a status quo in society and the artists and innovators who stand out are often the ones who overturn the standard in a compelling way. Great art breaks the previous rules. It is an inversion of what came before. In a way, the secret to unconventional thinking is just inverting the status quo.

This strategy works equally well for other creative pursuits like writing. Many great headlines and titles use the power of inversion to up-end common assumptions. As a personal example, two of my more popular articles, “Forget About Setting Goals” and “Motivation is Overvalued”, take common notions and turn them on their head.

Read the rest of the interesting article by James here

+++