In February 2012, my goal was to negotiate a severance in order to retire early and break away from the workforce. Mid-June 2012, just before my 35th Birthday, I received a severance and the final three months of WARN Act Pay.
The past ten years have been a blur. Although I didn't get millions in compensation, the most valuable asset I have is time.
This article is designed for those who are thinking of retiring early, taking a long vacation, or trying something new. Money is not the ultimate goal. It is possible to use money to live the lifestyle you desire.
Ten Lessons Learned after 10 Years of Early Retirement
Since July 2009, when Financial Samurai was launched, I have been writing about financial independence. The financial independence movement has been more popular since then. People are more open to thinking about their single life after the pandemic.
Financial independence means to have enough passive income to pay at least your basic living expenses. Passive income can be from stock dividends or rental income, bond income and private equity distributions.
Since 2013, I haven’t considered myself to be a retired person. After a year of traveling to 20 different countries with my wife I became bored. Instead, I wanted something more productive with my limited time.
For several years I have been consulting with private fintech companies, including Personal Capital. Since 2009, Financial Samurai has been my main source of financial information. Last but not least, I spent 2020-2022 creating a personal finance guide to help people get financial freedom sooner than they thought possible.
Also, I am not retiring. Instead, I used my spare time to do what I wanted. These are 10 lessons I learned from 10 years of early retirement.
1) Only you can decide how much you should retire early.
Some believe that having an investmentable net worth equal 25X your expenses is enough to make you financially independent. A net worth equal to 20X your annual gross income is better. You should feel the joys associated with financial independence once you have reached a gross income multiple of 10X.
You can't "cheat your way" to financial independence by cutting back on expenses by using a multiple or gross income. Instead, your income will increase and you will have to continue saving and investing.
It doesn't really matter what anyone thinks about your financial situation. It doesn't matter what anyone thinks about your financial situation. All that matters is whether or not you are able to do the things you want. You may not be financially independent if you believe you are financially independent, but you can't quit your miserable job or marriage.
2) Over time, your financial needs will likely increase.
It is likely that whatever you believe you will need to retire soon won't be the same forever. Most people will find that their financial needs will increase. These include rising healthcare costs, inflation, increasing financial needs, increased family time and medical mishaps.
In 2012, I was content with $80,000 per year of passive income. My next goal was $150,000 per year in passive income when my wife and I retired in early 2015. My next goal was to generate $150,000 in passive income by the time my wife joined me in early retirement in 2015.
After having our first child in 2017, I wanted to make more passive income. To raise a child in a costly city like San Francisco, it was necessary to make more money to cover rising healthcare costs and tuition.
With inflation at its 40-year peak, and a second child on the horizon, we have to make more income or invest more to stay afloat. As long as we have enough passive income, inflation should not affect our passive income. Bear markets will, however, set us back.
Current Estimated Passive Income
Our current goal is to generate passive income of at least $300,000. This will allow us to maintain a middle-class lifestyle in San Francisco and Honolulu, with our two young children.
Even though we don't have to make $300,000.+ per year, investments are subject to a lower tax rate. It is better to have stretch goals than come up short when it comes money.
Once your day job is finished, be open to earning passive retirement income. You can dramatically increase your chances to live a comfortable retirement by doing something you love that generates additional income.
3) Your overall dynamic will increase.
You should be flexible about your safe withdrawal rate, as your financial goals and needs will change. A dynamic safe withdrawal rate, which changes with the times, is the best type of safe withdrawal rate.
Contrary to what academics may believe, there is no single safe withdrawal rate. In the 1990s, the risk-free rate for return was between 5% and 6%. The "4% Rule" was established. Flexibility is key for a practitioner who gave up security at work in 2012 to become a .
While you're working and have a good pension, it's fine to talk about retirement planning. Once you have a steady income, like mine for the past 10+ years, it's quite another.
4 You will eventually take your freedom as a given.
Habituation is the main reason financial freedom will not solve all your problems. Although it is amazing to be able to do whatever you want when you want, eventually you will lose appreciation for your freedom.
Like how too much cake can be bad for your body, too much freedom might not be good for you soul. Do nothing. This is the path of least resistance. It is essential to have structure and make commitments in your day.
5 You'll likely feel a strong desire to return to work.
You will be more likely to second-guess your retirement decision the younger you are. You will feel more motivated to go back to work if you don't choose to retire to a purposeful job. You may feel a loss of the social interaction and the challenge of working on a mission after years spent in the office.
You should retire to something and not from something. Once you have negotiated a severance, you will find an amazing activity waiting for your.
Since 2012, I have had at least three attempts to get back to work. I lost my job within six months. The second time was in the first six months. I was concerned that I had made a serious mistake.
The second was in 2018, one year after my son's birth. To better care for my family, I felt the need to earn again. It's a lot to pay $2,000+ per month for unsubsidized insurance, and $2,500 per month for preschool tuition.
In addition, I thought it might be a good vacation to go back to work! It is one of the most difficult jobs in the world to be a stay-at home parent. You will be tested every day for your patience. It is easy to work 60 hours per week in investment banking, but it is not as easy as caring for a child 0-3 years old.
The pandemic was one year ago, and I had to fight my desire to return to work. Many of my friends worked from home and were happy to not work. So I decided to sign up if I could be paid to play tennis or go to the beach at midday.
6) Time becomes more valuable than ever.
It would seem that having more time would make one less grateful for it. Increased supply usually leads to lower prices. Once you are financially independent, however, you will see the reverse.
You can do what you want and you don't have to do anything. Every minute wasted is a loss of opportunity.
My business flights were frequently delayed while I was at work. Because I was flying during my work hours, it didn't bother me because I was still being paid. I had no choice but to wait.
Today, however, I feel more upset if my flight is delayed. I could have spent that time with my daughter, writing on Financial Samurai or playing tennis.
7 You have more freedom to express yourself.
You can express your opinions more freely if you don't work because you have to make money. It is easier to be yourself and not fear of being retributed.
You can think back to all the times you kept your mouth shut at work because you didn’t want to risk your promotion or raise. Even though your boss was completely against you, you pretend to be in agreement with him. Ugh.
FIRE gives you the freedom to be yourself without fear. You will feel more at peace if you speak your mind freely.
8) You'll get lost for an indeterminate amount of time.
Because our work is an integral part of who and what we are, if you quit your job, you'll lose a piece of your identity. The transition to retirement, or fake retirement, will be more difficult the longer you work. The initial transition to early retirement may be difficult and even fatal.
You might feel useless to the society if you're truly retired. If you feel depressed, your chances of becoming truly retired are higher. Don't underestimate the importance of having goals, status, or an identity outside work.
You will find something meaningful and worthwhile once you're done with your retirement. This is how you can find yourself once again. This hole was filled for me by writing a personal financial book and connecting online with other people.
9 Legacy becomes an important focus.
You can stop focusing on work and start to think about other things in your life. If you have children, you'll want to spend more quality time with them, and show them how you think. You're always thinking because you have more time to do the things you love.
Fake retirement, or early retirement, gives you more time for your thoughts. Your thoughts will eventually lead to the type of legacy that you want to leave.
It could be endowing a scholarship at the university they attend. Others might choose to give funds from a trust they can revocably transfer to charity they care about. It's publishing Financial Samurai three days a week, writing a newsletter once a weeks, and publishing my book.
One thing that kept me going when lockdowns started in March 2020 was the knowledge that my children would one day be able to bring my book to read and share their daddy's work.
10) Live for yourself and not for others
We worry about how others will view our decisions. Some people may be critical of your decision to retire early or lead a more unusual lifestyle. These people are called the Internet Retirement Police. These people can't help but be critical of your lifestyle.
The truth is that people don't really care about how you live your day, as long as you're not hurting anyone. Many people are too focused on their problems. Ironically, those who are most concerned about your situation and how it is described are the ones who really want what you have.
You are only letting your guard down if it doesn't lead to the life you desire. Nobody wants to spend more time making money on their deathbed.
Your time will pass faster than you think
One year equals 90 years. 45 years of a 90 year lifespan equals 1/45. This means that time accelerates as you age. Because you have less time, each year becomes more important.
Therefore, save money and invest aggressively as soon as you can. You should work hard when you have the energy. You will find that you have more options for what you want to do when you are tired of work. If you can get more time, the "sacrifices” you make today are not sacrifices.
You might not retire completely. You might be able to downshift to a job with a better pay and more meaning. You might even be able take years off work to care for your children. You may even be able to start your next business.
Consider Probabilities and Not Absolutes.
Whatever you decide to do, adopt my 70 / 30 decision-making philosophy. It is the heart of my book. If you have a 70% chance of making the right decision, then you should go for it. You can also be humble and know that you will most likely make a mistake 30% of the times, but you will learn from them.
A win-loss ratio of greater than 2:1 will make you more wealthy over the course of your life. You will live a happier life if you take advantage of every opportunity that comes your way.
Personal Capital paid Financial Samurai ("Author") compensation for the content in this article. Personal Capital Advisors Corporation is not a client. The maximum compensation is $500. Additionally, in a separate referral arrangement between Author and Personal Capital Corporation ("PCC"), Author is paid between $70 and $150 for each person who uses Author's webpage (https://www.financialsamurai.com) to register with Personal Capital and links at least $100,000 in investable assets to Personal Capital's Free Financial Dashboard. These arrangements allow Author to earn a financial benefit by referring potential clients and/or being incentivized for posting blog content favorable to Personal Capital. The Referral Agreement does not result in any fees or other charges being charged to investors by Author and Personal Capital. Referred investors to PCC who then subscribe to investment advisory services offered by Personal Capital Advisors Corporation ("PCAC") won't be charged any additional management fees or similar compensation. PCC and PCAC are not responsible for the content of any third-party site linked from this page. This blog post contains general information and is not intended to be legal, tax, or accounting advice. For specific questions, you should speak with a qualified tax or legal professional. Remember that investing comes with risk. Your investment's value will fluctuate over time, and you could lose or gain money.
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By: Financial Samurai
Title: The 10 Most Important Lessons After Retiring Early 10 Years Ago
Sourced From: www.personalcapital.com/blog/retirement-planning/10-lessons-after-retiring-early-10-years-ago/
Published Date: Mon, 19 Sep 2022 21:27:29 +0000
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