Zero your cerebral inbox.

Our brains are capable of amazing things. They’re responsible for every single advance in human civilization, and after thousands of years of evolution our brains have grown in size and complexity. We know more now than we ever have before. But, without fine tuning our thought process and how we actually act on our thoughts our brains end up being piles of mush that just spew ideas back and forth creating stress and anxiety in our lives.

Researchers say that everyday about 50,000 thoughts go through our heads. This can be anything from thinking “damn that girl/guy is sexy” to “I need to buy a garbage bag full of lemons this week.” 50,000 thoughts that range anywhere from the trivial to the oh-shit-total-life-crisis and most of these thoughts that could be actionable end up wasting brain energy.

I used to think that I was operating at maximum efficiency as an intelligent human being. I wrote down stuff occasionally that I wanted to complete, and I was actually completing most of the things that I had written down. Occasionally things would slip through the cracks because some of the line items became obsolete, some of them were too big and got deferred, among other reasons. Writing down goals is a great way to start, but it’s only the first step toward clearing your mind and absolving it of stressors.

Have you ever had a thought that occurred more than once concerning something that you had to accomplish? Maybe your thought was something like this: “I really need to send a card to my uncle Norbert”. You didn’t act on it, because you knew that you didn’t have to immediately. But then that thought rolled into your subconscious mind again. What you don’t realize is that this thought is actually causing you stress, and that’s why your brain regurgitated it. Your brain has been silently stressing itself out over your lack of action.

So, potentially you have 50,000 thoughts that need some form of exodus from your brain so your subconscious will stop harping over the petty — and the huge — stuff that’s on your mind. Fortunately for us there is a better way to live, although few people figure it out — mainly because they think they’re already operating at maximum efficiency.

You’ve heard of Zeroing your email inbox, right? The following approach is a way to Zero your brain — and it’s super easy to put into action.

1. Get it all out.

The first thing you need to do to clear your mind, and begin tackling problems logically, is to write out every single thought you have that needs to be acted on. Seriously, it doesn’t matter how trivial it is, because these thoughts need somewhere to go. We don’t want our brains to think that we aren’t in control.

Writing down EVERYTHING gives us a little bit more control, because we’ll start to realize that we have a lot more that we want to accomplish than we think we do. The more we get out, the more other thoughts will have room to surface. This is great, but it’s just the beginning.

Don’t write down aimless thoughts. You can’t act on something like “ooooh that car is a shiny blue”. But if you thought “I should paint my car a shiny blue” then you need to write that crap down!

2. Organize and categorize.

Every time a new thought is added to your list you need to create two labels for them. One is urgency — how soon does this need to be completed? And priority — should I complete this task first or another one? At first you’ll be labeling everything like crazy. After a few days using this system you’ll only have to determine the urgency/priority of new thoughts, because we’ve already taken care of everything else.

3. Add your organized thoughts to a calendar.

Here’s where things start to get cool.

After we’ve assigned our urgency, we’ll know roughly when our task should be completed. Now we can assign a date to the task and add it to our calendar. This lets us focus on the tasks with a closer deadline now, and defer ALL other projects until later. Our minds will start to relax at this point, because we’re telling our brains that the stuff it wants to get done WILL get done on our terms.

Our subconscious mind should start to shut off and open up, because it likes to not have to think about the same stuff over and over again.

4. Don’t let yourself think repetitively.

Your thoughts have been written down, assigned a priority/urgency level and have been added to your trusty calendar. Now, it’s time to see if things are working efficiently in your brain. Having everything out of your system should free your mind to think more creatively. Stress levels will be lower, because you know that you have everything under control.

A repetitive thought is a way for your brain to tell you that it needs something done. If you’re having repetitive thoughts that have already made it to your calendar, maybe you should reclassify its urgency. Your subconscious is pretty powerful, and if it’s making suggestions, it’s probably right.

5. Assign first/next actions.

This is the part of goal or list making that people don’t usually take into account. Sometimes tasks are vague, and just thinking about them stresses the shit out of us. This is because we haven’t defined our path to completion for the task. Every task can be completed if we break them into tiny chunks. If you think to yourself that you want to build a house, you can imagine yourself banging in the last nail and standing back thinking about what a good job you did. Thinking about how to start the project may be a little bit harder.

Say that our goal was to build a house and we labeled it with a high priority. You want to start building your house next week. How the hell do you make that leap if you haven’t completed one step of the process yet? Easy. You’d figure out what the first thing you need to do is. That’s what goes on your calendar. It may be “talk with an employee at Home Depot”, “watch some house building videos online” or “read the local laws to determine what permits are needed”.

The first action should be added to every item on your calendar (unless the tasks are single steps, of course). Once you’ve completed the first action, you’ll go through a similar thought process to determine what the next action should be to complete your task. Add the next action to your calendar.

Repeat this process constantly and don’t stop when you think you have it under control. This process will become second-nature and should be maintained for the foreseeable future to reduce risk of unnecessary stress.

6. The “five minutes or less” rule.

How often have you thought that you should do a task that would only take you about 5 minutes to complete, but instead you put it off until later? Things like doing the dishes, sweeping the floor, making the bed, or folding laundry often end up being put off which means two things: you’re robbing your future self of time, and you’re adding stress to your brain whether you think you are or not.

Every time you have a thought (and right before you write it down) you need to think “Could I complete this task in less than five minutes?” AND “Do I have five minutes to spare right now?”. If the answer is YES to both of these questions, then guess what. You’re going to be completing the task immediately. Then, you don’t have to worry about the dishes, or the bed, or the mail or whatever.

7. Drop it like it’s hot.

You know yourself better than anyone else, so you should understand whether your goals will come to fruition or not. Don’t lie to yourself, because it only hurts you (and adds more stress to your life).

Drop any tasks that you don’t think you stand a chance of completing. It’s nice to think that you’re a superstar and you can do anything you put your mind to, but WILL YOU? That’s the real question. If you won’t, then toss that task in the shredder.

Handy resources.

When I started keeping track of everything in my life I started using Evernote. It’s a free online service that offers a companion desktop application as well as mobile apps, and it’s main goal is to help you organize your life. Since you’ll typically always have a computer in front of you or a cell phone in your pocket, what better way to keep your thoughts in order than a program that was designed to keep your thoughts in order?! Evernote is free if you’re uploading 60MB of data or less each month.

Google also has their own version of Evernote, that I’ve actually migrated to. It’s called Google Keep, and I think it’s fantastic. It’s completely free. It syncs across your Google devices automatically. And it has a beautiful color-coordination system which is useful for setting priorities on your goals. I highly recommend this for anyone looking for a good productivity enhancement tool.

If you want to read more about this topic and how you can apply it to a more business-oriented setting, then you can check out Best Selling author David Allen’s book Getting Things Done: The Art of Stress-Free Productivity  from either Amazon or your local library. He goes into heavy detail about how to prioritize work-related tasks, through most of the steps listed above, and the use of filing cabinets, inboxes, etc. He’s a super smart dude and it’s a nice quick read.

A Kick-in-the-teeth Guide to Investing

Most people aren’t rocket scientists when it comes to investing. I’m not either, but I know enough about it that hopefully I can teach you something about it in the next five minutes.

You need to know why you’re investing.

The first thing you need to do is develop a purpose for investing. Without this you’re just going to sock away money for no apparent reason. By developing a purpose you’ll provide yourself with motivation by knowing what you’ll get when you’re ready to start making withdrawals.

  • Do you want to retire decades before your peers?
  • Do you want to travel the world?
  • Do you want to start your own business?
  • Do you want to put your kids through college?
  • Do you want to sleep on a bed made of money?

Then, you need to develop a timeline. A timeline will help you understand when you’ll actually achieve your financial goals. Make sure they’re realistic and within your reach. You could then apply your timeline to each of your investing goals. “I want to retire in 10 years with $1,000,000″. This is a properly formed goal. Now you have to figure out how you’re going to get that Million bucks.

How much of your income should you invest?

I’m not going to answer this question. Instead, we can explore it a little bit, then you can make your own determination.

Let’s say your goal is to save $1 Million and you’ve decided that your timeline is 10 years. The market grows at about 8% per year (on average). And inflation eats about 3% of your money. This means that your money will grow at an inflation-adjusted rate of 5% per year on average.

By plugging in a few numbers into the MoneyChimp compound interest calculator you can see that you would need to invest $75,718.65 annually to reach your goal of $1Million within 10 years. Realistic or not, that’s for you to decide.

I will say that 20% of your take home pay is a good number to start with, but over time you should increase this amount as you become more efficient with your money. For example, I can safely invest 70% of my income every month, because I constantly exercise my ability to optimize my finances.

How to invest.

When I became debt-free I was pretty confused when it came to investing. There’s almost too much information out there and no one to simplify it. I’ll make it as simple as possible. If you’re a pro investor then feel free to not read this.

You’ve heard of stocks, bonds and mutual funds before. These may just sound like words with no meaning, but each of them has their specific purpose. Stocks are tiny portions of companies. If you own stock in a company then you own part of a company. Bonds are money that you lend organizations or governments who then pay you back over time for your investment.

I invest all of my money in either mutual funds or ETFs. These two things are pretty much the same thing, but have slightly different tax structures. Mutual funds and ETFs are ways of investing in many companies at once. They reduce volatility (extreme gains or losses), because your money is spread loaded to hundreds or thousands of companies.

Kick-Ass places to invest.

The following are my suggestions of where you should be investing your money.

  1. The first and least obvious place to invest is your 401k. This is an investment! You can invest $17,500 into your 401k this year which will shelter your money from taxes. You’ll have to pay taxes when you withdraw money, but your money will grow tax free. Pretty slick.
  2. Vanguard. Vanguard is the mecca of investing. All of their funds have extremely low expense ratios (explained in the next section). They have many index mutual funds and ETFs, as well. This means a computer picks the allocation rather than a human, which means you pay less over time. Open a Vanguard account today.
  3. Betterment. Betterment is great because they make investing extremely easy. They automatically allocate your money and create an instantly diverse portfolio for you. You don’t have to know anything to use Betterment. I’ve had an account with them for over a year now and it performs just as well as my Vanguard account. My personal Betterment returns since February 2013: 10.0% Open a Betterment account today.
  4. Prosper. Prosper is a way to crowd-source loans for people. Someone may want a $10,000 loan. As an investor I can buy a $25, $50, $100, etc portion of that loan. The borrower then pays back the loan plus interest. While this shouldn’t be the foundation of your portfolio, it can add some nice diversity. My personal Prosper returns since July 2013: 9.38%. Open a Prosper account today

Terms you should know.

There is a very limited portion of investor lingo that you need to concern yourself with. Most of the other stuff is meant to confuse you and to make Wall Street employees feel good about themselves.

  • Expense ratio – The cost of operation for a mutual fund or ETF. The lower the expense ratio the better. Vanguard’s average expense ratio is 0.19%. That means they take a small cut of your money every day. The industry average is 1.11%. That means other companies charge nearly 600% of what Vanguard charges you.
  • Active vs. Index – Active management requires a human being — or a team of human beings — to decide the allocation of a fund. It costs money to pay these people, who are essentially throwing darts and making educated guesses with your money. Index funds use spiders, or robots, to decide the proper allocation. It costs less because there’s no one expecting a paycheck. Index funds reflect the market more accurately.
  • Dividend – This is free money that is distributed to you for owning shares of a fund. Think of it like a thank you. This money then gets reinvested into the fund, which provides you more shares — shares that you didn’t have to pay for. You do have to pay taxes on dividends every year.

Taxable vs. Tax-Advantaged.

There are three main categories that I’ll cover here. They are the three that I currently use, and the ones that I personally recommend.

  • 401k / TSP / 403b – These three investment options are pretty much the same thing. You can invest up to $17,500 per year of your pre-tax money here. You can access this money when you’re 59 and 1/2 penalty free. You can access your money earlier, but you’ll pay heavy fees, so I don’t recommend it. You’ll pay taxes when you withdraw from these accounts.
  • Roth IRA – This is a way to shelter an additional $5,500 per year from taxes. You use post-tax money (money that you’ve earned that’s already been deposited into your bank account), and you never have to pay taxes on this money again. It grows tax-free and you can withdraw it tax-free. The same rule applies that you have to be 59 and 1/2 to withdraw penalty free. However, you may withdraw the contributions you’ve made penalty-free at any point.
  • Taxable investing – This is where you invest the money you want to touch before you’re 59 and 1/2. You’ll use post-tax money to invest. You’ll pay taxes on the dividends and interest they generate, AND you’ll pay taxes on any capital gains or losses (these are generated when you SELL shares).

How to apply these principles.

At this point you may still not know how to invest and that’s fine. Here’s an example so you it will become clearer:

You decided you wanted to start investing $500/month so you could reach your goal of having $75,000 in 10 years. You know that in 10 years you’ll still be under 59 and 1/2, so you decided to open a TAXABLE account with Betterment.

Betterment only asks you one question: What percentage of your portfolio will be stocks and how much will be bonds? You answer by saying 100% stocks, because you’re young and you can afford short-term losses.

You set up an automatic $500/month withdrawal from your checking account every month and BOOM, you’re an investor. That’s it. Since you can reasonably expect your account to earn 5% (inflation-adjusted) per year you should easily reach your goal.

How to track your investments.

The only thing that I use to track my investments is Personal Capital. They have a streamlined interface that shows the growth of your accounts and your net worth over time. It isn’t a budgeting site like Mint, although they do track your purchases automatically which is nice.

Personal Capital is a powerful tool that can help you find hidden fees in your investment accounts — especially the tricky ones that hide in your 401k.

 

Crap that I avoid.

  • I don’t listen to people who try to convince me they have a way to get rich by buying or selling stocks.
  • Penny stocks. The people that buy them are misguided, and are subsequently throwing away their money.
  • Up-and-coming sectors. I don’t buy into hype, and you shouldn’t either. Broad-based index funds ONLY.
  • Sensationalism. The market goes up and down. Big media blows this out of proportion in whatever direction it’s moving. Don’t listen to these people, they’re just sensationalizing the market for ratings.
  • Emotional investing. If you let your emotions get in the way of your investing, you’ll be heartbroken when your holdings slide and excited when they climb. Leave your emotions out of it, and let the stock market happen.

Not so Kick-Ass disclaimer.

You’re ready to start investing. You know what an index mutual fund is and what expense ratios are. You know that you’ll earn money in dividends and you know you should avoid penny stocks. Blah blah blah.

Now you need to understand that you might LOSE money when you invest. Like I said, the market goes up AND down. Be conscious of this from the beginning. This doesn’t mean you should be fearful. It means that you should remain confident even during market turbulence. Recessions are eminent, but don’t let that scare you — especially if you aren’t withdrawing your money for a few years.

Quit your job and do something you love

When I created this site my goal was simple: to retire by age 35 and to document the 7 year journey. During these past 15 months I’ve gone through many life changes. We downsized to a smaller house, brought a 3rd baby girl into existence, and I quit drinking soda (this was huge for me) and eating french fries just to name a few.

As a family we went through even more financial changes. This site ended up becoming profitable (see below for details). We started generating passive income through our rental property. We began peer-to-peer investing through Prosper. We also started investing through Betterment. We moved the bulk of our investments to Vanguard (VTSAX). And we started tracking our finances down to the penny using YNAB.

A year ago we were doing most of our shopping in bulk at big box stores. Now we’re buying mainly organic (whenever possible) and gluten-free products locally.

And a year ago I was a penny pinching ass (I’m still conscious about my spending, but I’m far more laid back now). Optimizing our finances has opened new pockets of money for us to spend every month, so while our savings rate hasn’t dropped, our disposable income has increased.

My new goal for the future (and the future of this site) is to discuss financial independence to help us leave our full-time jobs and either become self-employed or work jobs that leave us feeling fulfilled. Getting locked into unfulfilling careers for decades can make the rest of life seem bleak, so why the hell should we let ourselves fall prey to this lifestyle?

Being unsatisfied at work typically leads to creating fulfillment in other ways. Shopping. Alcohol. Nice cars. The ability to purchase these things may make your career seem worth it, but they’re just band-aids that cover your problems instead of fixing them.

To find happiness and achieve success — however you define it — you may have to get off the treadmill and leave your job.

What does it take to leave your job?

As a general rule of thumb, you shouldn’t quit your job until you’ve satisfied at least one of three conditions:

  1. You have secured another job that will cover all of your normal monthly expenses (lateral moving).
  2. Your passive income has outpaced your monthly spending.
  3. You have 100 times your monthly spending saved/invested.

Without making enough to cover your monthly expenses a new job will soon become another stressor in your life. It may feel like a nice change of pace, and you may feel happier doing the work that you’re doing, but the fact that you aren’t earning enough will start to eat at your financial house sooner than later. And you may start panicking when the money starts running out and the bills keep rolling in.

Option #2 is the best possible situation, but it takes the most money, and usually the most time. If you can swing it, props to you.

I would almost always recommend option #3 whenever possible. Although similar to the Rule of 300, this plan assumes that at least some portion of your income is going to be generated either by self-employment, or working in a career field that you’re passionate about.

Given a 5% rate of return (8% market returns MINUS 3% annual inflation) your money will last for 10 years without supplementation of income. That’s 10 YEARS to start generating income or to turn your passion into a money maker.

Small businesses and sole proprietorships fail constantly. One of the main reasons behind this is because the business owners rely on their business income to pay for their lifestyles. When you have 100x of your typical monthly spending saved, you’re less dependent on the money that your business is generating, which gives you the freedom to grow without simultaneously having to stress out about paying your mortgage.

My plan for the next two years is to bring my savings up to 100x our monthly spending level. That will give us a solid 10 years to get our shit together. It will give us the independence to leave our current jobs and to explore our options for self-employment.

For those who are less entrepreneurial, I would recommend figuring out what your passions are and once you have 100x times your income saved, try to find a career in this field. Working for other people isn’t always terrible. Personally, I love being my own boss, but it’s not for everyone.

I stated in a previous post that I would disclose the income that this site generates. I don’t know if I’m going to do this monthly or not (if you would rather me not post this stuff, feel free to let me know).

February earnings breakdown for this site:

  • Google Adsense (I use it sparingly, mostly on old posts and search engine favorites): $253.51
  • FlexOffers (Credit Sesame and Personal Capital): $155.65
  • Republic Wireless referrals: $57.00
  • Impact Radius (Betterment): $80.00
  • You Need A Budget: $84.00
  • Bluehost: $270.00
  • Amazon: $9.56
  • Total: $909.72

I actually had no idea I made THAT much until just now. As you can tell by looking around, I hardly advertise on this site. Most personal finance sites that you’ll visit are filled with ads. They litter the sidebars. Sometimes they’re smooshed into the articles, and they detract from the value of the sites themselves.

My goal is to provide you with the best possible reading experience while occasionally mentioning products that I personally use and love that I think you’ll love as well.

Writing is something that I’m passionate about, and it’s become both a habit for me AND a source of income. This should be proof that it’s possible to earn money doing something you love. Crafting, traveling, cooking, eating, writing, photography, design (graphic, interior, etc) — among other things — can all be considered “hobbies”, but can also generate a decent income — especially if you have the ability to dedicate more time to them.

Finding happiness

During the fall of 2013 Mrs. M and I attended a workshop in Ecuador which covered the basic topics of Happiness, Freedom and Wealth. One of the presenters (who also happened to be the host), Cheryl Reed, led a class on happiness. Specifically, it was about discovering what you are most passionate about.

She gave us a test and the instructions were simple: make a list of 10 things that bring you happiness (your passions). Then, compare each list item against the others to determine what your personal top 5 passions are. These are the things that would be essential for you to lead an ideal, happy life.

Mrs. M and I filled out our own personal lists of our passions and without peeking at each other’s papers this is what we came up with:

Johnny’s top 5 passions:

  1. Being with my family
  2. Laughing
  3. Building and maintaining friendships
  4. Educating our children
  5. Financial Independence

Mrs. M’s top 5 passions:

  1. Spending quality time with my family
  2. Catching up with my mom
  3. Reconnecting with my best friend
  4. Being well-rested
  5. Making memories

What we discovered through this exercise:

The first thing that I realized was that I have an excellent spouse. Well, I obviously already knew that, but it’s refreshing to see proof that we have similar passions and that our minds are in the same place.

I also realized that everything on our lists — short of financial independence — is FREE. It doesn’t cost anything to have a great time with family or friends. Laughing is free. Making memories can be accomplished anywhere, anytime and at little to no cost.

It also gave us a good perspective on the future life that we’d like to lead.

Since we took this test almost six months ago we’ve refocused our lives around creating happiness. We’ve become more social and have been building and maintaining existing relationships. We’ve been traveling to see our families more and calling them over Skype whenever we can. We’ve been coloring, building and dancing with our kids. And we’ve been hosting a game night every couple of weeks at our house.

We realized that we don’t need to be financially independent to complete any of these things. We don’t even need to have money at all to find happiness. Happiness is obtainable, and the answer to your own personal happiness is probably sitting right in front of you.

We also realized that we are extremely happy in life. We have a great family. We have legitimate, obtainable goals. We work our asses off to be the best people, friends and relatives that we can be. We try to help other people, and we’re teaching our kids to behave and to eat well. We travel. We laugh. A LOT. We are happy without even trying. But after realizing what our passions were it made complete sense why we had felt so fulfilled all along.

As for the well-rested part. That may not happen in the near future, especially with three kids running around the house, but it gives us something to look forward to in our eventual early retirement.

Find out what you’re most passionate about.

You should take a few minutes and take this test too. The exact instructions for the Passion Test can be found HERE.

After you know what you’re truly passionate about, ask yourself if you’re devoting as much time as you could to each of your items. If your #1 passion is doing puzzles, then ask yourself if you’re doing puzzles enough. If it’s something that’s unobtainable, ask yourself “why”.

Could you devote more time or energy to your passions? Do you have to set money aside or take vacation days to live your passions? Could you change your lifestyle so that you were able to base your life AROUND your passions (and not the other way around)?

If you start acting on your passions, you’ll find that you’ll live a happier, healthier, and more financially satisfying life without even trying.

What are you passionate about? I want to know. Leave it in the comment section below.

The Rule of 300

There are countless articles and calculators that will attempt to give you the best possible retirement advice and a projection of how long your money will last. But if you’re looking for the quickest and easiest way to figure out how much you’ll need to retire, then read on.

Pretty much every retirement calculator on the Internet is useless because the only two numbers that you need to look at are the amount of money that you spend during an average month — and the number 300.

After you figure out how much money you typically spend each month (You should already know this!) OR estimate the amount that you’ll need every month in retirement, multiply that number by 300. This is the amount of money you need in order to retire.

It’s that simple.

I made the table below so you could easily figure out the rough amount you’ll need in order to retire without even having to whip out your calculator. This applies equally to retirees of all ages ranging from 25 to 70+.

The Rule of 300

Monthly spending Amount needed to retire
$0 $0
$100 $30,000
$300 $90,000
$500 $150,000
$1000 $300,000
$2,500 $750,000
$5,000 $1,500,000
$7,500 $2,250,000
$10,000 $3,000,000

Where does your spending fall on this table?

Inherently, if you don’t spend ANY money in a normal month then you don’t need any money to retire. And conversely if you spend into the 5-digit range every month you’re going to need at least $3M to sustain your living habits.

This leave us with a necessary portfolio balance of $0-$3M. The amount you need in order to retire is completely up to you, and is dictated solely by your spending. The younger you are the more time you’ll have to reduce your lifestyle expenses, and optimize your current lifestyle to make 300x easier to accomplish.

How does this math work?

The formula for The Rule of 300 is very simple. It’s basically the 4% safe-withdrawal rate in reverse.

If you’re unaware of this term, The 4% Rule is a generally accepted estimation that allows you to withdraw 4% of your investment balance every year (adjusting annually for inflation). So, if you have $3M invested, you could take out $120,000 during the first year — in other words $10,000 per month.

Let’s do this equation out in long-form. First, we will start with a more modest family that spends $2,500 per month. To account for the family’s annual spending we need to multiply this number by 12 which equals $30,000. Now, to make sure they have enough to retire we need to multiply this value by 25 which brings us up to $750,000.

Now, they are able to withdraw 4% of this $750,000 portfolio in their first year which is $30,000. They can then divvy this money up by month. $2,500 per month (notice that this is the same amount we started with).

As time goes on the portfolio balance will continue to increase as the markets increase. And when utilizing the 4% Rule your portfolio balance should never bottom out. Ever.  So this means that if you had 300 times your monthly spending at age 20 it would last forever. It would work equally as well for someone retiring in their 40s, 50s or 60s.

Here is a calculation that shows the 4% rule in action:

We assume a 5% rate of return every year. Actually, we assume an 8% rate of return, but we remove 3% to adjust for inflation. This means that we can look at the cost of things in 20, 50 or 100 years in terms of today’s money. The graph above shows that the 4% rule will allow you to withdraw money comfortably for at least 100 years.

The 4% Rule could fail in turbulent economic conditions. But also take into account that as the economy grinds to a halt prices on goods will stagnate or drop. This allows you to effectively live on less while maintaining a withdrawal rate equal to your spending.

This simple math should give you a pretty good idea about how easy it can be to retire early. Generally, people are going to tell you they need millions of dollars to retire. But, you don’t need over $1M until you hit $3,333 per month in spending.

These calculations aren’t going to allow you to upgrade your lifestyle financially after you retire. They assume that you’re going to continue living a modest (or at least an equivalent) lifestyle for the rest of your life. These calculations also don’t take into account that you still have YEARS that you could earn more money (and probably will). A part-time job can offset the necessity of saving 300 times your monthly spending by a lot.

 

I’m not going to reinvent the wheel, so if you’d like more information about the 4% Rule, otherwise known as the “Safe-withdrawal rate”. Visit these fine sites:

jlcollinsnh – Stocks — Part XIII: Withdrawal rates, how much can I spend anyway???

MMM – The 4% Rule: The Easy Answer to “How Much Do I Need for Retirement?”

Investopedia – Four Percent Rule Definiton

Withdrawal calculator via BankRate: Savings Withdrawal Calculator