There comes a time in every journey towards financial independence where you just want to give up. All seems pointless. Hopeless. Why bother?
I doubted myself a million times before I finally reached my breaking point. The point where you realize you have nothing to lose and just say “Fuck it!” and go for it. It is the point where you realize the only way things are going to change is if you make the change happen.
When I finally had my moment of clarity and decided to take control of my financial future my goal was to simply retire as early as possible and never feel obligated to work for wages ever again. I had no idea of a timeline and no plan on how I was going to make it happen. All I knew was I was fed up with my current situation and I needed to make a change.
Along the way there were countless mistakes I made, obstacles to overcome, and hard lessons to be learned. I made those mistakes and I overcame those obstacles and I have learned a lot of hard lessons along the way. And now, I give to you the top 10 hard lessons I learned on my path to Financial Freedom.
#1 Nobody cares and the world owes you nothing
If you think for one second that anyone out there gives a damn if you succeed, think again. The world does not give a shit of you wil or lose, live or die. The world owes you nothing and will take from you everything if you let it.
Life does not care about what you want or what you plan. If you want something, you need to go get it. Nobody is going to do it for you. The sooner you realize this, the sooner you can get to work.
#2 DO SOMETHING!
Get off your ass and do something.
You want to be happy? Start eliminating things from your life that make you unhappy,.
You want a better job? Go get it.
You want to learn how to invest the money you earn? Read and Study. Find a mentor. Make an attempt at something. Go out in the world and fail a little.
I have never succeeded at anything worthwhile that I didn’t first fail at.
Einstein defined insanity as doing the same thing over and over yet expecting a different result. If you want a different result, you need to take different actions. Whatever you want you will not get by sitting around hoping or wishing for it. You need to go do something about it.
If you do nothing guess what happens… NOTHING
#3 Quit complaining
Ok I have done my share of complaining. I would wake up every morning and say to myself “I hate this fucking job. This is bullshit. What am I doing with my life? This sucks”
Any of this sound familiar?I realize now unhealthy this was. What I should have been saying to myself was “What am I going to do today to make this better?”
Complaining does nobody any good. It will begin to have a self fulfilling prophecy. After all, if you are so unhappy yet you never do anything to change it must be because this is the best you can do. You deserve to be unhappy. And you begin to believe that which inhibits your willingness to take action because you know you will fail because you deserve to. Its a bad cycle to get in so stop complaining.
#4 Always pay yourself first
Why do you think the government takes income tax from you directly from your paycheck? It is not to make things easier for you its to make thins easier for them. Because if they waited until the end of the year, they know that money would be gone. And so too is the money gone every year that you failed to save from each paycheck isn’t it?
No matter how far in debt you have become, no matter how badly you think you need to go out and blow off steam every pay day, and no matter how baldly you just have to have the new iPhone, you MUST pay yourself first. It is quite possible the most important rule to attaining the type of wealth that will eventually set you free. There can be no deviation, no cheating just this one week. This must become a rock steady habit.
If you think you can’t afford it, read up on 10 ways to save money that will make you a millionaire.
Look at it this way, if tomorrow the government decided to raise your income tax and you lost an additional 10% of your paycheck what would you do? You would figure it out. Well, figure it out and put 10% of your paycheck aside for savings every week. You will thank me in 50 years when you’re a millionaire as a result.
#5 If your employer offers you a 401k match, take it!
This may sound like a no brainer but you would be shocked at how many people turn down the free money they are offered by their employer in the form of a 401k company match.
Even if you are just putting in the bare minimum required to receive the full match, you need to take advantage of this. I wrote an entire article about contributing to a 401k plan which you can read here.
Free Money
Over the course of my working career, my employer has contributed more to my 401k plan than I have. At my peak I was receiving almost $9000 a year. Free money.
The most common company match is 50 cents for every dollar the employee contributes. Lets say $2,000. I was lucky enough to work for a company that had a lower dollar for dollar match but a very high discretionary contribution that did not require much on my part. However lets use the most common contribution program and look at how it will perform over time.
Someone under this plan who saves $2000 will receive $1000 in free match money. That is a total of $3000 per year. Lets assume 7% growth over a 30 year career. That comes out to $292, 363 of which $97,065 was free money. If you are spending $50,000 a year in retirement that is like being able to retire 2 full years earlier and you did not have to work any harder to do it.
If I offered you $97,065 right now no strings attached what would you do? You’d take it! So do yourself a favor. If your employer offers you a 401k with company match, TAKE IT!
#6 There is no sum of money too small to save
Remember when you were a kid and you wanted something you couldn’t afford? What did you do? If you had good parents, you had a piggy bank and they encouraged you to put your spare change in their and save up for what you wanted. Well now you want early retirement and like a good Daddy I am going to encourage you to save your pennies to get there.
Large sums of money are very rarely obtained as large sums. Lottery winners and inheritance earners are about it. Every other wealthy person on the planet earned their wealth in small amounts that they grew over time.
Nobody runs a marathon in one giant step.
Growing a nest egg takes time
In order to build a substantial life savings you will need to save throughout your lifetime and you need to stop putting it off and start now. Think of a watermelon. The seeds are tiny but will eventually grow into a 15 lb watermelon. It takes time and constant feedings of water and nutrients through the soil.
Think of your next egg like a watermelon. The first deposit is the seed. Now you must continue to make deposits and grow it over time. If you stop making small deposits it is like what happens to a watermelon crop if the rain stops.
I have discovered one simple app that can help you. Acorns is an app that will automatically round up all of your credit card purchases to the nearest dollar and put it into an account. You can choose the investment mix and start earning gains. It is kind of a digital piggy bank if you will. The best part is that if you sign up using my affiliate link here, we will both get $5. Give it a shot.
But even of you don’t use Acorns, or if you are like me and use Acorns plus one or several other accounts to save money, the important thing is that you start now and remain diligent if you hope to one day reach financial independence.
Allow me to demonstrate
Lets look at twin brothers Larry and Barry Moneysaver. Larry saves nothing towards retirement until he is 35 years old. At 35 Larry says Oh shit, I need to start saving if I am ever going to retire. So Larry decides to save $1000 a month for the next 30 years until he is age 65. At 7% interest annually Larry will have just under $1.2 million.
Larry’s brother has been saving since he started working at age 20. Larry wasn’t making much then so he was only saving $500 a month, half of what Larry is saving now at age 35. Assuming the same 7% annual interest, in 30 years Barry has Just $585,000 or about half of what Larry has after 30 years. But remember, Barry was only 20 years old when he started and is now 50. in another 15 years when they are both 65 Larry has $1.2 million as we mentioned earlier, but since he started so much earlier, Barry now has $1.7 million. Even though he was contributing half of what his brother contributed.
The moral of the story is to start early, be consistent, and remember, no sum of money is too small.
#7 Be consistent and never give up
Time is your best friend when building up a retirement nest egg. I have demonstrated that in #6 with the examples of Larry and Barry. The longer you can allow compound interest to perform, the better off you will be in the end. I wrote an article on why compound interest is the key to long lasting wealth which you can read here.
When it comes to compound interest time truly is money. However, compound interest alone will not be enough to build you a truly sustainable nest egg. You will need to make consistent deposits as the foundation for interest to grow upon.
Think of it this way, if you want to grow an apple tree, you plant a seed. If you want to grow an orchard, you plant several hundred seeds season after season after season.
The same holds true for your money. You can save $1000 one time and earn 7% a year over 30 years and it will grow to $8000. Or you can save $1000 every year for 30 years and grow it to $100,000. Or you can save $1000 every month and have over one million dollars.
Consistency over time is how the magic happens.
#8 Pay off debt and stop using credit cards
Credit cards make it far too easy for people to buy things they don’t need with money they don’t have. I found this out myself the hard way. I ran up credit card debt to the point where I was paying $200 just in interest. That is $200 a month that I could have been using for any number of other things including saving towards early retirement. I was barely able to make a dent in the principal because all of my cash flow was going towards interest payments. Once I got serious and was able to pay down my credit card debt, it became incredibly easy to save money quickly.
You need to become disciplined in your spending enough so you can eliminate the need to even hold a credit card in your wallet. Credit card debt truly is a complete waste of money. I wrote an article on how to get out of credit card debt which you can read here.
If you are ever to achieve financial independence, you must learn to eliminate all credit card debt.
#9 Eliminate all unnecessary spending
It may not seem like a big deal now to spend a few bucks every day on your Starbucks coffee but simple purchases like that are adding up and costing you more then you realize. I wrote an entire article detailing 10 ways you can cut spending which you can read here. You will be shocked at how much you might be spending on silly items that you could easily live without and how much money it adds up to over a lifetime.
Go back and look through some of your old credit card statements at the stuff you bought. Do the math. How much do you spend each month in interest and then multiply it out over 10 years or even 40 years. It will really open your eyes and shock you as to how much of your life you are throwing away on meaningless purchases.
Allow me to demonstrate. Lets assume you are like me and spend $200 a month on interest alone. If you saved that money instead in an index fund earning 7% annually over 40 years you would have just shy of $500,000. How many hours do you have to work to earn $500,000?
#10 It is OK to fall down, as long as you get back up!
You are going to slip up and make mistakes from time to time. You need to understand that from the start. It is ok to make mistakes, but you need to be able to learn from them.
Sometimes, life happens and screw up your plan. You may be doing well for months and making serious progress in paying down your credit card debt when suddenly your hot water heater goes, or your car needs new brakes, the kids need braces, etc. Stuff will happen that will knock you off track. The key is to get back on track as quickly as possible. If you have the right mindset and have developed good habit, this will be easy to do.
#11 It is never too late to start on the path to financial independence
If you are not taking control of your financial future because you feel it is too late or you waited too long, then what is your plan? Die at work? Struggle until you are dead? Never get ahead and die in debt? Live off of your children or society?
If what is holding you back are your regrets for not starting sooner, imagine how you much in the future you will regret not starting now.
Thanks for reading
Earl