The simple road to financial freedom/early retirement

joyfulguyMay 4, 2007

You have your own business. Everyone from a toddler upward has one.

You have employees, as does everyone else.

Most business owners must pay their employees.

Some of your employees work for you once, and usually provide something of value when they do. When I tell this story to kids, I tell them that if they send a Dollar out to buy ice cream ... the ice cream tastes good ... and that Dollar (employee) worked for them once.

Maybe they got good value for their money.

As a business owner, you're lucky - if you work it right, your employees will pay you!

As you know, busines owners must learn how to manage their business well, including how effectively their employees work.

If they don't, they may go broke, eventually.

Either you boss your Dollars - or they'll boss you. And in most cases you won't like that much.

Decide to learn how to manage money effectively. Don't let the concept intimidate you - take it a step at a time.

Decide to start doing that ... now. Start today.

Spend less than you earn.

Build an emergency fund - 3 - 6 mos. income on hand eases the panic if you suffer layoff, (especially the permanent kind), substantial illness, etc.

A small amount of money in the credit union/bank is useful - the amounts that you'll need for short-term operation, including some emergencies (though I often don't have such, myself - I can explain the reasons and method, if you ask).

The bank figures to make more on your money than you make, after all. And guess who builds those fancy buildings for them.

Decide how much, what percentage of your income that you want to spend currently, and what percentage you want to put to work for you, short- and long-term.

Every time that you get paid, take the money that you plan to put to work for the short- and long-term out of it, bank it in another account in the short term, to keep it separate.

Learn how to invest it for maximum efficiency.

As for the rest of the regular paycheque ... learn how to live on that amount.

If you use "credit" (really "debt") cards, make sure to pay off outstanding balances in full before the due date.

When you pay them interest on that loan ... you have less to live on, to buy things to serve your needs.

You dropped those employees down a rathole, so to speak, because you were impatient ... you had to have the stuff before you'd earned the money so that you could pay cash for it!

That is - you just gave yourself a cut in salary, until that loan is paid off. Impatience (usually) has a price!

As someone said here recently, I think that it was over at the Kitchen Table, "Maturity is ... learning how to postpone gratification".

Invest skilfully ... help your kids (or yourself) gain that extra education later (even if your deal is that they repay you ... why not you, rather than an outside lender)?

Your pay-off?

You'll be able to retire early ... I read in my favourite money management magazine a year or so ago about a guy that retired at age 34.

And wrote a book, called "Stop Working! Here's How You Can!". No boss told him that he really should do that!

Retire early - be free to do what you choose.

________________________________

I welcome your comments.

ole joyful

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coolvt

Great advice. What I was told is that in most cases it takes one decent income to support yourself/family. If you want to get ahead, get a second and/or a third income and invest all the extra. I always marveled how people couldn't find work when I always had 3 jobs or incomes.
I met a Hungarian couple who had been in the US for about a
year. They had saved enough to buy a good used car cash and were saving for the downpayment on a house. They both worked fulltime jobs during the day and both worked two more jobs nights and weekends. So, they had 6 incomes all minimum wage jobs.
If these people who could barely speak English could do it, there is not excuse for anyone else.

    Bookmark   May 4, 2007 at 5:12PM
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joyfulguy

Perhaps some recent visitors missed this on the first go-round, but may find it interesting.

Input? Comments?

ole joyful

    Bookmark   July 6, 2007 at 3:53PM
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jkom51

Unfortunately, the lack of a comprehensive universal healthcare plan in the US makes early retirement for many people impractical. As stats from AARP are finding, a growing percentage of retirees are finding their healthcare costs, even under Medicare, are chewing up an average of 34% of their income.

And early retirees don't get Medicare. You get it at 65, or unless you're disabled (you cannot do at least 3 of the standard Assisted Daily Living criteria).

The reality is, people are extremely spoilt by employers picking up the majority of healthcare premiums. I used to pull medical insurance premiums for clients. If I could find a basic HMO policy for a healthy 45 yr old at less than $700/mo, I thought I was doing really well! If you weren't healthy, or in your late 50's, expect a premium more in the vicinity of $1000/mo.

That comes along with all kinds of deductibles and "don't pay that, sorry" exclusions, BTW. Expect another $50-200/mo costs for those extras. Standard cap on benefits is $1M - anything over that, let's say, a serious degenerative disease, forget it, insurance money cuts off at that point.

Also doesn't include dental or vision. Or long term care insurance.

I'm not saying it can't be done. But many, many people grossly underestimate how much health insurance of ALL types, actually costs in the real-life marketplace.

Insurance underwriting is very democratic. It doesn't care if you've saved $15M for retirement or $15K. Medical improvements can keep you alive a lot longer these days, even with serious diseases. Insurance companies know this, which is why life insurance costs are dropping like a rock, while all medical insurance premiums are rising like hot air balloons in a high wind. Big costs lie ahead for Boomers as they age, and that skew to the actuarial tables means the Gen X & Y'ers won't get a lot of slack cut on their premiums. The first time you have something wrong with you, they know you're an expensive risk forever afterwards. So you'll pay for it, one way or another.

    Bookmark   July 6, 2007 at 4:54PM
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cmarlin20

Here in California, I pay for individual health insurance. It certainly does not suffocate me, nor take 1/3 of my income. But I don't have an HMO, hate em.

    Bookmark   July 13, 2007 at 1:11AM
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zone_8grandma

Two comments,
Joyful guy lives in a country with universal health care - huge difference as jkom pointed out.

I retired "early". I was 55. BUT, I then went to work (full time) on a contract basis for my old employer (at a lot more $$ and collecting my pension). I did that for a year, then got another well paying contract job also full time. From those jobs (which I also enjoyed), I saved enough that I could then work part time for the next 4 years. I retired "full time" just last year.

I'm lucky, my pension benefits include health insurance. But there are caveats (as jkom also pointed out). I have a very minimal dental policy, no eye care, and no long term care. I do have a prescription drug benefit (which I don't currently need). I have a $200 deductible for lab tests and xrays. Result is that I pretty much pay for my annual mammogram and blood work. I can only hope that should I ever really need that health ins that it will actually be there for me. Also, I'm aware that at any time, my previous employer can require me to pay for part of my health ins. And I'm one of the lucky ones.

DH works for the same company, so there's no point getting coverage as his spouse as the coverage is the same....

So even though I enjoy what seems to be a fairly secure retirement, it's not really all that secure considering the health care issue.

    Bookmark   July 13, 2007 at 11:42AM
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joyfulguy

Yeah - for many years we had modest premiums for health care ... which paid for part of it.

Then our province, as some others had, discontinued the premium.

A few years ago, having promised before an election not to raise taxes, on winning, the party, astonished at the poor condition of the gov't. books ...

... instituted a "Health Levy" to help pay for medical costs ...

... not a tax, you understand!!

Costs me about $475. per year ... and though I seldom use it, being in excellent health, I consider it cheap at the price.

ole joyful

    Bookmark   February 14, 2008 at 6:16AM
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