It seems to me that everyone’s plan is to work through their youth and retire around the age of 65. This has never made any sense to me. Why would you want to spend your best days behind a desk only to retire when you’re too old to enjoy it? I’m a fairly healthy person, but I don’t see myself cliff diving in Mexico after I receive my AARP card.
I certainly don’t have it bad in the job department, but my goal is retire or at least semi-retire while I can still live it up. Below is how I plan to do it.
This is a big one for most people my age. A lot of my friends are currently paying down their student debt, living in expensive apartments, and making payments on their fancy cars.
Avoiding debt is one of the best investments you can make. Instead of trying to find a stock that will give you a 9% return, just get rid of your credit card debt. Most people seem to think of debt as just additional payments they have to make every month, but it should be thought of as a hole you need to get out of before you can relax on a sandy beach somewhere.
Live a frugal life
I believe being frugal is in my DNA. I’ve never cared much about having all the latest gadgets and finding the best deal on any item is a fun challenge. That said, always remember that the poor can’t afford cheap goods. If I just have to have something, I do my research buy the best version of it. Even if I have to pay a little more, this approach makes more sense in the long run since it prevents me from having to buy it again when it breaks.
While rent is ridiculously expensive throughout the whole Bay Area (more on that in a minute), I live in the South Bay area where apartments cost much less than those in beautiful San Francisco. I’m not complaining, I’ve always liked this area and it’s where a lot of my friends and family happen to live here. I’m a quick jaunt from the Santa Cruz beach and the city. Not a bad place to live at all.
I’ve also started couponing whenever I go shopping. If you’re not using coupons, drop the ego. Nobody in line at the store cares. It makes zero sense to pay more for something when you can easily get it for cheaper by snipping out some coupons that are already being mailed directly to your door. I’m not saying go and buy 1,000 Vitamin Waters just because you can get them for a $0.05, just save money on the things you need.
Frugal links: Mr. Money Mustache, RetailMeNot, /r/frugal, Frugal SF
Save and invest wisely
Saving money is natural part of the frugal lifestyle and I’ve been doing it ever since I was kid. I used to go door-to-door asking neighbors if I could mow their lawn for $3 and instead of spending my money on candy, I put it all into a savings account my parents setup for me. My Mom once got me a leaf blower for Christmas and it was one of the best gifts ever. You think I’m joking, I’m not.
I put as many purchases as I can on a credit card to collect the reward points, this credit card is paid off at the end of every month to avoid an interest fee. I have a checking account with enough money to pay my rent and bills, I keep 6 to 12 months worth of living expenses in a high yield savings account, and the rest goes into either a Roth IRA, a Traditional IRA, or an Individual stock market account. This system allows me to grow my wealth while protecting myself and my girlfriend from being homeless if I happen to lose my job and the stock market crashes… again.
Even as a youngster, the stock market was interesting to me and when I was 17-years-old I made my first investment. I invested the $300 I got for my birthday (I’ve always asked for cash) in STEM and nearly doubled my money. I had to ask a friend to purchase the stock for me since I didn’t have the capital to open my own account, but I knew I was hooked.
Unfortunately, in 2008 that whole world came crashing down on me (like it did for many others) and I sold all my shares and exited the market completely. If I were wiser then, I would have been buying instead of selling. I’ve since taught myself a lot about how to invest wisely and I now feel comfortable investing much more than $300.
I’ll most likely write a new blog post about how I invest another time, but I will say this: don’t buy stocks. Buy ETFs that pay dividends when everyone else thinks the market is crashing and hold onto those purchases as long as you can. If you just have to buy stocks (it’s more exciting, I know), I suggest sticking to blue chip companies with a low P/E ratio, a high market cap, and a steady history of paying dividends. You’re also going to want to learn how to read financials.
I like these ETFs: VTI, VYM, VDC, and VIG.
Investing links: Investopedia, Marketwatch, Google Finance
The cost of living is too damn high!
Like I mentioned before, living in the Bay Area is expensive. Most of California is in fact and that’s why I plan on getting out of here. When it comes time for me to hang up the ol’ work boots I’ll most likely end up in a someplace like Colorado where the weather is similar to California, but the price of living is much, much lower. Simply put, I would much rather own a beautiful home on a acres of land in Colorado than a small condo in the Bay Area.
Avoid debt, don’t waste money, and invest wisely to grow your wealth.
Am I missing anything? Want to share your plan retirement plan? Tell me on Twitter!