I've done three things that got me to my current financial position. They are not 100% unique to me. I am grateful to have found these three things. They allowed us to save and build our wealth from about $60,000 to $700,000 in just under 5 years. Everyone needs to forge their own path to Early Retirement. Getting our results in 5 years is not the norm, some might take twice as long or longer.
These three things were the difference makers for me.
1. I was working at an insurance company as an underwriter for $35,000 a year. I knew I could do more than what I was doing, and I didn't want to work hard for 7-10 years before being able to make a supervisors salary of maybe $70,000 - $75,000. I decided to go back to school spending $30,000 and 1 year to get a Master's in Finance. At the same time, I signed up and passed the CFA Level 1 exam. I grinded every day all day for a year, even on Christmas Day, because I didn't want to go back to the insurance company on my hands and knees begging for my old job back. I came out the other end of the Master's degree with an internship paying me a total of $8,800 over 4.5 months. Below minimum wage. But this internship gave me the valuable experience I needed to land the job that changed my life. Only 6.5 months after graduating, and 18.5 months after I left a job paying me $35,000, I got a job in equity research paying me $125,000 a year for the next 4 years.
How much of this was my own personal ability? I don't really know. But I know that I was never the kid with straight A's. I barely got into University out of high school. I took 5 years to get a 4-year bachelor degree and took 12 months to get my first job out of university. Am I special, I don't think so. Did I get lucky, sure.
But what's not unique is that I took a chance on myself. I put myself in a position to fail, because I knew that staying where I was was not going to get me to where I wanted to be. I decided one day that I was going to change my life for the better. It required some upfront investment in cash and time, which made me work even harder when I got back to school because this time I didn't want to waste a dime. I still didn't graduate at the top of my class in grades, but when it came to equity research, I was the one person in the entire class that you could point out and say "that guy wants to work in equity research", and that drive changed my life. It brought the right opportunities to me because when people know how they can help you they will help you when they can.
2. The best savings plans work best when you have multiple streams of income. In my case, I was fortunate to marry my wife who is equally as good at making money as me. Having two incomes but sharing our housing expenses is an amazing way to save a ton of money.
I saw a video the other day where the guy said, the best way to be selfless is to be selfish. You aren't going to be useful to anyone if you aren't good at something. It's like the airplane safety videos, put on your oxygen mask first, before you help others, because if you can't breathe you're not going to be useful to anyone. In our case, we both worked hard to get through school and get our designations so we could get high paying jobs. Focusing on ourselves first, later allowed us to focus on helping each other build our savings.
3. Living like we only had one income for 4 years. While our incomes were high, we still did not even spend one person's income each year. We lived below our means to the point where we were savings nearly 55% of our income every year.
Living below your means, whatever that may be is in fact just another way of saying saving money. Saving money = Living below your means.
Even if you make $500,000 a year, if you spend $530,000 a year, you are not saving money. This happens more often than you think. If you keep "growing your lifestyle" as you gradually make more money, you could end up with a boat, a cottage, a nanny, 3 cars, a country club membership and a lifestyle that requires a lot of monthly payments to maintain. Boat's need to rent the docks they are parked in, cottages need to pay all the same maintenance as your house, a nanny is a whole person's income you need to take out of your income, each car takes gas and insurance and annual maintenance, and country clubs charge monthly fees.
What I Didn't Do
Despite my background in investments, I didn't get "good" at it until recently. Early in my career I trusted the opinions of others that didn't share my economic interests and I got burned with a few bad investments. I did make some good investments which did even things out. I know better now.
Our condo turned into a good investment, but for years we thought of it as just another way to save some of the rent we were paying as equity (by getting a mortgage).
The primary way of building up your savings is to actually save your income. Investment income in the early stages will not be a game changer. But when you save up a lot, then investment income will be a huge relative to your income.
What Can You Do?
Invest in yourself. Without a doubt, I believe investing in myself was the primary reason I got a great paying job, which was step 1 in Saving Money.
Be selfish so you can be selfless.
Save Money Retire Early is written by Jon Lo, a barely 30 something change optimist, and personal finance guy. I believe anyone can be rich or poor, it's what you save that makes the difference.