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HOW TO RETIRE AT AGE 30 (& Live Off Your Investments) - YouTube
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so in this video today we are going to
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be talking about how much money you need
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to have set aside in order to live off
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of your investments completely and I
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know that the title of this video may
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sound crazy about retiring by thirty and
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there are a lot of people out there
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selling a pipe dream of you can retire
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by thirty as long as you invest in this
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course or go buy real estate and while
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that may work for some people I'm not
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here to sell you guys a course or to
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pitch you on any kind of product like
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that what we're going to simply talk
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about here is how much money you need to
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have invested in order to live off of
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your investments and essentially not
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have to work to earn your money and
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believe it or not there's actually
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countless people out there who have in
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fact retired as early as thirty years
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old by following this exact strategy
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that I'm going to outline so if this
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idea of retiring early and not having to
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work for your money is something that
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interest you what I want to ask you guys
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to do is go ahead and drop a like on
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this video just to show your support I
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really do appreciate that as it helps
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out with the algorithm and allows this
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video to get shared with more people but
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what we're going to look at in
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particular in this video is something
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called the 4% rule and that essentially
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shows you just how much money you need
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to have set aside in order to label off
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of your investments now you can in fact
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live off of different types of
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investments like real estate or the
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stock market for example or a business
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that's providing income for you but what
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we're going to use in this video as an
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example is a passive stock market
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investment and we'll show you exactly
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how much money you need to have invested
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in order to live off of that income so
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the goal here with this strategy is to
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simply invest your money and have a
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large amount of money invested and then
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you would essentially be living off of
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the interest income or the growth of
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that money without touching the
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principle and as I'm sure you guys can
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imagine if you're not touching the
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principle or your initial investment
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then your money could foreseeably
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last forever now the sooner you're able
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to retire is all based on how much money
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you're able to save up and how little
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money you are spending each and every
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month and there's actually a whole
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movement of people that are following
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this exact strategy and it's something
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out there called fire and fire stands
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for financial independence retire early
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and there's a lot of people who are
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doing blogs and videos and all kinds of
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stuff about this concept and there are
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countless examples out there of people
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who have retired as early as 30 or even
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less by following these strategies
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alright guys so there's basically three
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steps you have to follow in order to do
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this and as I'm sure you can imagine
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step number one is to be frugal or to
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spend as little money as possible
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because ultimately what you're looking
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to do is save and invest enough money
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that the interest or the dividends or
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whatever the growth is pays for your
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monthly living expenses and as I'm sure
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you guys can guess if your monthly
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expenses are six thousand dollars versus
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three thousand dollars you're going to
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need a lot more money invested to cover
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those expenses so being frugal and
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saving as much money as possible is
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actually going to serve two different
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purposes here well number one the less
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that you're living on the more of your
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paycheck you're able to save up and the
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more of your paycheck you're able to
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save up the more you're able to
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contribute to that freedom fund which
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will eventually be paying for all of
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your living expenses and then second of
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all by spending as little money as
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possible every single month you actually
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don't need to save up as much money to
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potentially live off of the interest or
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the growth of your money and we're gonna
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go over those exact numbers right now
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alright guys so step number two that you
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have to follow here is going to be a
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tough one
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but that is going to be saving fifty to
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seventy percent of your take-home income
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and again if you're looking to retire by
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thirty years old let's say you want to
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work from twenty to thirty and then not
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work for the rest of your life you're
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going to have to take some drastic
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actions here and that is why you need to
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live off of a microscopic amount of
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money and that's why step number one is
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so important by cutting down as much as
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possible on those monthly expenses so
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people who are trying to do this you're
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not gonna see them driving brand new
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cars you're not going to see them going
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on vacations they're probably going to
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be you know eating canned beans and
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doing campfires in the backyard
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as summer entertainment not that there's
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anything wrong with that but they are
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literally spending as little money as
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possible because they're focusing on the
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long-term picture of what they are
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trying to do so people who are following
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this fire movement are often aiming to
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save 30 times their annual expenses and
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that will allow them to withdraw about
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4% per year without basically touching
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that principle and that is where that 4%
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rule comes into play and that is
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basically where you're able to draw from
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an account about 4% per year and over a
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long period of time based on the growth
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of that account and those investments it
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shouldn't be chipping away at the
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principle which should in theory give
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you unlimited money so what you're
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aiming to do here is to lower your
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monthly expenses as much as possible
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figure out what it costs you to live per
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year multiply that by 30 and then save
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up that amount of money by saving 50 to
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70 percent of your paycheck every single
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week or month or however often you are
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getting paid all right so now the
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question you guys have been waiting for
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just how much money do you need to have
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saved up and invested to live off of
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that money following the 4% rule well if
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your annual expenses are $20,000 per
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year they would recommend having 30
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times that amount of money saved and
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invested so $600,000 if your annual
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expenses were $35,000 that number
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becomes one point zero five million if
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you're somebody spending $50,000 per
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year on your living expenses you would
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need to have 1.5 million dollars saved
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and invested and for the final figure
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here if you spent a hundred thousand
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dollars per year on cars and housing and
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food and all of that you would need to
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have about three million dollars to
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successfully follow this strategy so I'm
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sure this goes without saying guys the
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best way to follow this strategy and to
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reach that retirement as quickly as
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possible is going to be to keep your
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monthly expenses as low as possible and
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just to put it in perspective for you
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guys every additional $100 that you
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spend per month if you follow this is an
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additional $36,000
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you need to have set aside in that
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freedom fund to support that $100 of
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monthly spending so if you're serious
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about this and you want to retire at 30
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or even younger you are spending
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literally as little money as humanly
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possible all right so the final step to
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following this strategy is going to be
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passively investing in the stock market
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so most people following this strategy
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are actually following the Warren
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Buffett style of passively investing in
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index funds and if you're not familiar
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index funds are basically a way for you
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to have diversified exposure to the
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stock market where you're not
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essentially picking what stocks are
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going to outperform you're just
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passively owning the entire market so
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people following this strategy are not
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out there trying to beat the market they
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are not stock traders or stock pickers
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they simply passively invest in these
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low fee index funds one of the most
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popular ones being the o o or the
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Vanguard 500 fund and essentially what
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you are doing is buying a small piece of
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the 500 largest publicly traded
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companies out there and all the
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different dividends those companies pay
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are all collectively put together and
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then you earn a quarterly dividend from
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that ETF and over the last hundred years
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or so the stock market on average has
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returned about eight to ten percent per
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year so if you are only drawing 4% from
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that account based on historical data
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you should never be touching that
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principal over a long period of time and
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that is how you would be able to live
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off of 30 times your annual income if
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you save that money and invest it now
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that being said that is the perfect
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segue into the sponsor for this video
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which is Weeble so if you guys are
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meaning you're not paying any fees to
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purchase the Vanguard 500 ETF that we're
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talking about in this video right on
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math there that is two completely free
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commission in the process if you use my
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link but if you guys are interested in
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grabbing two completely free stocks that
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is going to be down in the description
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below so finally the last thing I want
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to do here is to put all of this
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together and go through a real example
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of how you could in fact follow this
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strategy and even retire by 30 now again
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this is going to require some very
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drastic saving because essentially
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you're trying to work for about 10 years
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of your life and then not have to work
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for the rest of your life so most people
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will never be able to accomplish this
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because of the amount of sacrifice that
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is required but that being said let's go
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ahead and run through the numbers now so
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let's say you're earning a salary of 75
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thousand dollars per year from your job
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and ideally you don't have any you know
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school loan student loans medical bills
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or anything like that so you haven't
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gotten sucked into the consumerism and
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you don't have like a brand new car so
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your expenses are as low as possible and
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I know this sounds like you know
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theoretical situation but this was
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actually about the same situation I was
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in when I graduated college I was 20
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years old now I was making about sixty
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eight thousand dollars so a little bit
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less but I had no debts I had no car
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payment and so I was somebody who could
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have potentially followed this strategy
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so after you pay your taxes your
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take-home pay is going to be around
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fifty six thousand two hundred fifty
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dollars now we know already in order to
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pull this off
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you need to save 50 to 70% of that
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take-home pay in order to actually build
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up enough money to live off of that
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income so we're going to assume you are
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saving 70% of that take-home pay so you
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would need to live off of 30% of that
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post tax income which amounts to just
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over $16,000 or around $1400 per month
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now is that possible
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it absolutely is is it easy absolutely
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not
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you're certainly not going to be going
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out to the bar and buying beers or going
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out to dinner you're probably going to
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be living in a tiny apartment driving an
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old car in eating at home for breakfast
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lunch and dinner but at that type of
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sacrifice is worth it to you for the
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long-term picture it is something you
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may be willing to do yourself
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so each year you would be saving and
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investing a staggering amount of money
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which is 70% of your take-home pay or
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just over thirty nine thousand dollars
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and that is how you would be able to
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pull this off and assuming you kept that
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cost of living the same at around
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sixteen thousand dollars just over 16
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thousand your freedom number or 30 times
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your annual expenses would be just over
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five hundred six thousand dollars so how
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long would it take you to save up that
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money let's go ahead and answer that now
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well if you took that thirty-nine
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thousand three hundred seventy-five
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dollars per year of money that you are
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saving and invested it in the stock
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market earning eight percent return and
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as we said historically it's an eight to
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ten percent so we're gonna go on the
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conservative side well in ten years at a
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eight percent return per year you would
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have five hundred seventy thousand four
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hundred eight dollars and forty cents
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meaning you could then if you kept those
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living expenses the same following that
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four percent rule not have to work for
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your money past that point and just to
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circle back guys what this really comes
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down to is the level of sacrifice
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involved are you really willing to live
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off of about fourteen hundred dollars
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per month or do you wanna have vacations
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and going out to get dinner and things
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like that so it's not people who are
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doing this that are out there traveling
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and dining it's people that are living
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as frugal as possible and finding
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enjoyment in other areas of life other
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than just you know spending money on
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dining and things like that now is this
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a strategy I would personally follow
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probably not because I am one of those
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people that enjoys traveling I enjoy
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dining and I do spend a little bit more
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than the average person
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so my freedom number would be multiple
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millions of dollars but instead I follow
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the strategy of earning as much as
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possible and saving a lot of that earned
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money and then eventually allowing that
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to supplement my income by having that
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interest
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or the growth of my money paying for a
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lot of those things that I want and
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believe it or not guys there are
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honestly countless people out there that
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have followed this exact strategy and
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retired at 30 or less one of the most
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well known people being mister money
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mustache he has a whole blog where he
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documented this whole journey of
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becoming financially independent and
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retiring early with both him and his
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wife so I'm gonna link up his blog down
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in the description below as well as a
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couple of other stories about people who
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have followed this exact strategy and
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retired at 30 or less so that's gonna
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wrap up this video guys thanks so much
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for watching if you're new to this
[841]
channel make sure you subscribe and hit
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that Bell for notification so you don't
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miss future videos and I hope to see you
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in the next one
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