What is your financial freedom number? This post will discuss how to calculate the amount you will need to retire. Financial freedom is the point at which your investments and income exceed your expenses.
At this point, you can safely retire or work on projects of your choosing. In another blog, I discuss the concept of how to “Increase the Velocity at Which Your Money Grows”. Meaning that not all forms of income are treated the same, and thus are taxed at different rates.
To name a few of the top minds that Tony Robbin’s is able to glean advice from are Carl Icahn, Ray Dalio, Warren Buffett, and Steve Forbes.
I found that these two books were super easy to listen to and understand.
What is so Special About These 2 Books on Retirement?:
I want to give you a brief summary about me so that you know where I am coming from. Some of you may know that I have a background in business. My father was a business owner for 40 years (he is now retired), while my stepmother currently owns her own boutique commercial real estate company.
I got my undergraduate degree in International Business. Currently, I am obtaining a Master’s in Business Administration with an emphasis in RenewableTechnology. My projected graduation date is in December of 2018. I have been a Broker in Real Estate since 2010, and have been dabbling in the stock market game since I was 16.
Why do I tell you all of this? Because I can confidently say that “Money: Master the Game” and “Unshakable” are excellent books. This is especially true for the average person who may not understand the intricacies of financial jargon.
Tony Robbins is probably the only person with enough pull to get an interview with the 50 most influential financial experts alive today:
Not only does he explain investment concepts in laymen’s terms, but really delves into why each recommendation is so critical to the plan that he puts forth.
It frustrates me whenever I go to an expert and they don’t explain the reason for why I should make a particular change.
For example, have you ever taken your car in for an oil change just to find out that you need to fix or replace 2-3 other parts?
Wouldn’t you feel more confident in the situation if the mechanic showed you how dirty your air filter was? This way you could see for yourself that it does, in fact, need to be changed.
Overall, if you are new to reading finance books for pleasure and want to listen to an audible book that is simple to digest start here.
In sum, to become financially free, you must study the successful individuals who have already achieved this goal.
These financial experts advise not to get skittish and sell all of your holdings. By selling your stocks in a downturn, you lock in your losses.
***Keep your holdings and continue to buy stocks (dollar cost averaging) throughout a downturn. This will result in purchasing stocks at a cheaper price per share. Additionally, you will have obtained more shares at this lower cost.
When the stock market bounces back you will own more shares and have bought them at a discount.
The “buy and hold” strategy worked even during the lost decade (during the 1990’s). If you had invested $100,000 in a diversified basket of indexes, you would have grown it to $191,000 (about 6.7% return per year).
A bear market is defined as a 20% or more fall in stock prices
A correction is defined as a 10% decrease in stock prices
Laura Vanderkam discusses how morning hours are the best time to get things done for yourself! During this time there is the least amount of distraction because no one else is awake to force their priorities onto your life.
Most successful people do one or a combination of the following things in the morning:
work out (get this, studies show that working out in the morning cause you to sleep better at night!)
Read the news (you will always be up to date on current events and be able to talk knowledgeably about them throughout the week)
Get their personal life in order
Moreover, the mornings are your uninterrupted time to complete the things that you would normally put off.
How Does This Apply to Real Life:
Steve Jobs, Oprah Winfrey, you and I all have 168 hours a week.
How is it that some people are able to create empires, while others struggle to stay afloat? Could it all be coincidence and luck? I think not.
The power of habits for success and routines can help organize your life and reduce stress.
Write emails (to people you have collected business cards from and stay in touch by increasing your network)
Read the news
Work on your career
Update an expense sheet
Review stocks and investments
Or even have sex before dawn (I like to call this act preventative marital counseling)!
A Breakdown of the hours in a Week:
1 week = 168 hours
Work consumes 40 hours, and sleep takes up 56 hours (8 hours x 7nights)
This means that you have 72 hours to live “Your Life”
What will you do with those 72 hours?
Start investing in yourself by learning more. Listen to an audible book while you workout in the morning. Make learning one of the many habits that drive you toward success. Start by downloading What Most Successful People Do Before Breakfast, and start your day off with the right mentality.
The thoughts that run through your head comes from what you think about and the material that you expose your brain to.
Your brain is like a sponge and it is malleable. According to medicinenet.com, “Neuroplasticity is the brain’s ability to reorganize itself by forming new neural connections throughout life”.
There is a saying, “What fires together, wires together”.
Our brains can’t possibly remember everything that we learn, which is why it is important for us to continuously learn similar concepts over and over again. With practice, and hearing or reading similar anecdotes, we are able to retain more information over time.
Here is a quick Youtube video (produced by Sentis) to help you understand how Neuroplasticity works:
One habit of success is to read or listen to mantras and anecdotes of motivation.
Willpower is a muscle that needs to be practiced! The more times you complete a task, the easier it will be to motivate yourself the next time to do that task again!
Soon this task gets memorized and is then put on autopilot.
One example of this is the task of driving to work. Maybe the first time you drove to work you needed to look it up on google map, but now you daze off listening to the radio and the next thing you know you have arrived.
Successful Habits: Use Your Time Efficiently
While we are on the subject of commuting to work, I want to point out that this is a perfect time to listen to an audiobook!
Instead of listening to a radio station that plays the same “top 20” songs that you have probably already memorized all the lyrics to, listen to an audiobook!
If you are like me, you probably spend at least one hour in the car driving every day.
The average audiobook is between 9-14 hours long. You could crush a book every 1.5 to 2 weeks! Last year I listened to over 30 books!!!
My favorite tool that helps me crush books like there is no tomorrow? Apple Earbuds!
They automatically stop whatever is playing (music or an audiobook) whenever you take out one or both earbuds.
Furthermore, each earbud holds approximately 1.5-2 hours of charge and the case is a charger too!
I absolutely love that it connects to my phone and works with Siri.
Moreover, the phone will tell you how much charge each earbud and the case has!
The 10,000 Foot Overview:
I have read many success and self-improvement books because they are the mantra that I want repeating over-and-over again in my head.
By creating habits of success and efficiency routines, you will be able to put these tasks on autopilot.
Once an activity becomes a habit, it takes less effort to motivate yourself to perform the task.
You don’t think about all the steps it takes to brush your teeth and get ready for the day, its just a habit. You could probably perform this task, while you do something else (like listen to the news or an audiobook).
By waking up earlier in the morning, you will be able to accomplish more and prime yourself for success!
Become a lifelong learner, and start by grabbing the Apple Earbuds today 🙂
My goal is to build a community where we all share helpful tips and suggestions, but I cannot complete this task on my own. I need your help!
Maybe you know some habit that helps you be successful.
Do you wake up early and do an activity other than the ones mentioned above?
If so, what are they and how do they help you be more successful or effective? Feel free to comment below, because we want to hear from you!
“The stock market is a game of transferring money from the impatient to the patient. If you’re willing to hang in there and put a small amount of money in, there’s no one who can’t get financially free, as long as you diversify.
To get a brief idea of what Tony Robbin’s book is about, watch this quick youtube summary by TridentLion below. A word of caution, it would be silly to think that you could gain all of the wisdom within this book through this 6-minute video.
My father always said, “There are many ways to learn throughout life, all of which cost money. You can pay to learn or you can go through the-school-of-hard-knocks”.
The most difficult part of the learn-as-you-go through trial-and-error mentality is that you may not know what you should have done instead. You will be constantly blindsided by obstacles and a constant feeling of uncertainty.
Managing your finances is a huge part of the game-of-life. Whether you want to or not, you are a participant of this game and have to play.
Metaphor: Knowledge is like holding a light while walking around in a pitch black maze. Are you holding a candle or a spotlight?
Think of knowledge as a useful tool to help you get through this maze. The more you know, the better questions you will be able to ask.
With a spotlight, you may find a map that you would have otherwise missed if you were just holding a candle.
When you take the time to learn, you attain the knowledge and skills that will better equip you to get through this maze. The end of the maze is called financial freedom.
If you enjoyed this article or have any questions about asset allocation and stock market theory, post a comment below!
A Roth IRA is a type of retirement investment account.The difference between a Roth versus a regular IRA is “when” you pay the taxes on the money.
Roth IRA: Pay income taxes at the time you earn the money, and the invested funds and compounded interest grows tax-free. When you pull the money out later, you will not have a tax liability on those funds.
Regular IRA: You take a tax deduction for the funds during the current tax year. When you liquidate the funds at the time of retirement, you owe taxes on the amount you withdraw per year based on your current income tax rate.
I like a sure thing, which is why I pay my taxes up front (so that when I withdraw the funds later I don’t have to pay taxes).
This means that when I look at my Roth IRA account, all of the funds are mine (no calculations or guessing involved)!
You can open an account with any number of brokerage companies. I use Vanguard because you can trade an unlimited number of their index funds for free.
In a prior blog post, I showed you how you can save $650 per month by reducing the amount you eat at restaurants and cooking your own meals.
The maximum amount that you can contribute to a Roth IRA account per year is $5,500, which is $458 per month (you can fund your future retirement by not eating out today)!
A 7% Average Return on Investment Over any 40-Year Period:
I love to break things down so that we can visually see what kind of monthly goals you need to have to achieve the maximum contribution.
$5,500 per year divided by 12 months is = $458 per month.
Can’t find $458 per month? Read this article to see how you can, in fact, save for retirement!
Create Habits That You Can Put on Autopilot:
Investing should become an automatic habit, like brushing your teeth.
While we are on the topic of brushing your teeth, add listening to an audiobook while you get ready in the morning to your list!
It takes me half an hour to get ready in the morning, and half an hour at night. Additionally, I spend at least 30 minutes driving to and from work every day.
With the cordless Apple Earbuds, I am able to listen to 2 hours of a book every day!
Yes, other cordless headphones do work, but this all-in-one earbud integrates Siri into the user experience.
What does that mean? I can make phone calls by double tapping, ask Siri to turn up the volume, when I take one earbud out the audiobook automatically stops playing, and so many more awesome features!!!
As you know, I am a life learner. These earbuds allow me to crush a 300-600 page book every 1.5 weeks! I multi-task listening to books while cooking, cleaning, exercising, and driving!
Retirement is Possible:
Start young, and be consistent. The younger you are, the better off you will be.
Interested in how to become more efficient with your time? Well, this article is written just for you! Reaching our “Asset Manager” number (the amount that you are able to quit working and manage your own assets- see prior blog post), starts with your daily habits, routines, and systems.
The Sweet Spot:
Routines free up your mind for creative or more difficult problem-solving thinking. We all have 24 hours in a day, but some people use those hours more effectively than others.
I recently finished a book called “The Sweet Spot“, by Christine Carter Ph.D. and she emphasizes the importance of knowing when to multi-task, and when to concentrate all of your focus on one thing.
Christine Carter Ph.D. advocates focusing all of your attention on one task, when performing that task is difficult or the outcome is critical.
Example: When I am studying for one of my MBA courses, I limit distractions by muting my phone and setting a timer for 1 hour and 15 min.
Studies show that your brain works best when you take breaks in between difficult tasks. Typically, this means getting up, walking to the watering fountain, grabbing a cup of coffee, or going to the bathroom.
An example of how I practice this recommendation is that I listen to audio books while I am driving instead of listening to the radio station.
I am using the 30 minutes of driving productively (that is 1 hour round trip), instead of listening to the radio that plays the same top 20 songs over and over again.
The average audiobook is 9-15 hours long, this means that you can complete a book in 1.5-2 weeks on your way to and from work!
I create systems for my life so that I can aggregate five to fifteen minutes here and there, and over time those saved minutes become hours and then days.
How to aggregating time: Here are a few examples of how I squeeze more time out of the day.
I meal prep twice per week: I used to cook dinner each night, which took me an hour to cook and clean all of the dishes.
That is 1 hour x 7 days per week=7 hours of cooking and cleaning for just dinners.
I now meal prep on Sunday and Thursday nights: In one hour I do all of the cooking for 3 meals per day, for the next four days.
That means I have traded 7 hours (of cooking just dinner) for 2 hours and prepared 21 meals for the entire week.
How do I do this? I will break up the hour of meal prep in 15 min increments so that you can see how I create 12 amazingly healthy meals in 1 hour.
To start, breakfast is usually pretty simple (doesn’t require much cooking: boiled eggs, yogurt, bananas, apples, and Odwalla juice). The only item on my list that requires cooking are the boiled eggs.
Boil 8 eggs (2 eggs per morning plus a banana). Once the water boils set a timer for 12 minutes.
Put a large pot on the stove and cut/cook onions.
Open a bag of arugula (one bag of salad from the store makes 4 lunches), and add beats, corn, cheese, and carrots to 4 sets of Tupperware.
Cut all vegetables for your stir-fry.
Throw all vegetables and meat into the pot. You want to make sure that you add the items that take the longest first.
Add your ingredients in the following order: onions, carrots, potatoes, broccoli, mushrooms, and zucchini/cucumber.
Tomatoes, tofu, and spinach always get added last.
It doesn’t matter what you are cooking, this is the general order that vegetables go into a pot. Chicken and pork take longer to cook than beef.
Your eggs are done! Pour out the water, and let eggs sit in cold water for 10 minutes.
Stir the stir-fry, and finish making the salad. Put the salad in the refrigerator.
Peel the eggs and put them into Tupperware.
Stir the stir-fry.
Clean the cutting board, knife, and the pot you used to boil the eggs in.
Stir and finish the stir-fry.
Portion the stir fry into Tupperware.
Finish clean up.
Lifehack: Crockpot chicken for 5 hours and shred. You can use this in you salads. Creating a crock pot should take no more than 15 minutes to create and clean.
Lifehack: Meal prepping allows me to live by the 80/20 rule. Meaning that 80% of the time I eat healthily.
When I am out eating at a restaurant with friends, I am allowed to eat whatever I want. I still fit into my high school cheerleading outfit from 12 years ago!
Finance Hack: See prior blog post about how much money you can save by cooking rather than eating out.
How long does it take you to get ready in the morning?
Everyone has to brush their teeth and get dressed. My earbuds allow me to run around my house without having to carry my phone with me.
Moreover, this allows me to listen to an audiobook or a ted talk while I am brushing my teeth.
I find that it takes me 30 minutes to get ready in the morning, and 30 minutes at night.If you add the 30-minute drive to and from work, you can listen to 2 hours of an audiobook!
You’ll be crushing books in no time!!!
You can’t tell me that you don’t have enough time to absorb a book every week and a half, because I have just found the time for you! ;P
Create a list of errands and group them by location. Then, complete all of the errands that are closest to each other during times of the week that I will be in that area of town anyway. I am sure you have noticed that I love to create lists!
Lists help you become better at time management and organization. These elements are key to increasing your efficiency!
Do you have any time-saving lifehacks? Post a comment below.
If you have enjoyed this content, remember to share so that we can help as many other people become better time managers too 🙂
Dream big, and then make them a reality (by goal setting)!! This blog post is about how to make your dreams come true by seeing into the future with a technique called Mental Modeling!
Let use a metaphor: building a road. We will call the ultimate destination location “The Dream”, and we are trying to build the straightest road to get there.
How would one go about building this road? Should we begin by thinking about what materials we are going to need to build this road? Would we send a scout(s) out to see which way is the fastest route? You know that there is a river ahead that we will need to build a bridge to get across. When will you start planning and thinking about how to cross this bridge (when you get there or beforehand)?
Thinking about all the many possibilities that the future could hold is called mental modeling.
To quote Dwight D. Eisenhower (the 34th President), “Plans are worthless, but planning is everything. ”
Goals are dreams with a deadline.
Short-Term vs. Long-Term Goals:
Ask yourself, by what date would I like to have this dream become a reality? Is it possible in a year? You should have long-term and short-term goals. Think of long-term goals as ones that can take up to 2-5 years to see to fruition. Whereas short-term goals can be completed within a year.
Remember, if you don’t know where you want to go… Anywhere will do!
Ideally, you should have a five-year plan, a one year plan, and milestones that you will complete within the current year.
Writing Down Your Goals:
Writing down your dreams, goals, and plans is essential to this process. Start a journal, if you don’t already have one. Writing your goals down makes us more accountable, and provides a standard to which we can compare what we said we were going to do and what we actually did.
The journal becomes the map of what the future looks like, and is a tool to reflect on our past actions, achievements, and areas to improve.
Back to the metaphor of building a road: If we know that we must cross a river, why wouldn’t we send a portion of our troops to start gathering materials and preparing the riverbank (so that when we get there, the site is already half-built)?
If we use the concept of mental modeling, we have spent time thinking about the foreseeable traps, potholes, and rivers down the road. We may not be able to see all of the obstacles, but at least we are prepared for some of them. Knowing is half the battle. The other half is preparing yourself so that you have all the tools to deal with the situation when you arrive.
A Life Long Student:
Success is an art and a skill. As with any skill, it must be honed and practiced.
Recently, I just finished listening to a book called “Grit“, and highly recommend it to anyone interested in studying the secrets of success. Angela Duckworth is a Distinguished Professor of Psychology at the University of Pennsylvania, and faculty co-director of Wharton People Analytics.
She has devoted her life to finding the secret to outstanding achievement. Her conclusion is that the common factor is not talent, but a focused persistence called “grit”.
To be gritty means to find your passion, and to stick with it for the long haul. In her book, she discusses how to find/develop grit and how to parent your children to have grit.
Anyway… Back to Goal Setting:
According to Angela Duckworth (the author of Grit) the higher the goal, the more abstract it is. The lower the goal, the more concrete it is (a means to an end).
Example of a long-term goal: I want to become the CEO of a fortune 500 company!
Short term goal: I will arrive 15 minutes before my boss gets to work. This will allow me to prepare a summary of what items I accomplished the day before, and what items we need to complete today.
The completion of this short-term goal will prove to my boss that I am hardworking and organized. My boss will remember this when she completes my yearly review, and I will be promoted!
Here is a Ted Talk that Angela did about Grit. She is a super interesting character, and this video was what made me want to read her book in its entirety.
A Real Life Example:
An anecdote from my life: Two years ago I wanted to “read more books”. This goal wasn’t very specific, so I set a lofty goal of reading one book per week. This means 52 books per year (remember to dream big).
I asked myself, “How can I possibly read a 300-500 page book each week when I stare at a computer for 8 hours a day?”.
Then, I asked myself the same question, but in a different way. “Is there a way to intake the information without reading?”
My solution: Audibles!!!
Looking back at my user history, I can see that I listened to 30 books last year.
On average, it takes me about a week and a half to listen to a book. I have listened to books that I would have probably never read, like “The Grand Design” by Steven Hawking. It would have been really difficult to read about “M Theory”, but listening to it was super easy!
The 10,000 Foot Overview:
When I look back at my journal (my map), I didn’t accomplish reading 52 books last year. I did, however, “read more books”, and absorbed 30 books worth of information. Not too shabby!
I love the saying, “shoot for the moon because even if you don’t land on the moon, you are still amongst the stars”.
Is your dream to retire and just manage your own wealth (see a prior blog post to understand what your number is)? Are you stuck and don’t know how to get there? Post a comment, and I will gladly help you design a map to get you there (create short-term goals to get to your long-term goals). You are the creator of your future!!!
Getting into Real Estate and navigating the waters of purchasing your first home can be quite confusing. The goal of this article is to explain how to understand the differences between an FHA and conventional loan in terms that everyone can understand. In the last blog post, I discussed the concept of obtaining enough cash flow to cover your monthly overhead expenses. This is the point at which you can quit your job and become an asset manager.
Let’s talk about what the most common types of cash flow producing assets are:
First, an individual usually needs to obtain a loan from an MLO (Mortgage Lending Officer). Moreover, the lender needs to be an approved FHA provider. For example, an individual goes to their bank (like Wells Fargo or their local credit union) and obtains a loan.
Once the purchase of the property is complete, the bank will sell that loan to a federal government agency (Fannie Mae/Freddie Mac).
An FHA loan can only be used to purchase a primary residence and requires a minimal 3.5% down payment.
A conventional loan requires a higher down payment and has slightly stricter requirements.
You might ask, “Why would I apply for a conventional loan when I can put less money down on an FHA loan?”.
One reason is that sellers prefer conventional loan buyers. This is because FHA loans require that the home meet certain minimum standards. A few examples are: the house must have a stove, the water heater must have earthquake proof straps, the buyer must be purchasing the home as their primary residence, etc.
Another reason why sellers prefer conventional loans over FHA loans is that they believe that the buyer has stronger financials.
All loans require an appraisal, and the lender will only lend up to the amount that the home appraises for.
In an inclining market, where demand is high and there is an inventory shortage, a house may not appraise.
If this should happen then one of three things will have to happen.
The buyer and seller will either have to re-negotiate the purchase price
The home will fall out of escrow (no agreement is made)
The buyer will have to pay the gap (come up with the difference between the appraised value and the contract price).
Interested in Learning More about Real Estate? Read on…because knowledge is power!
In a later blog, I will discuss the importance of using higher LTV (Loan To Value) conventional loans to purchase an owner-occupied home, and then turn it into an income producing property.
If you are interested in purchasing a fixer-upper home and want to finance the cost to remodel, then check out my article on FHA 203k loans. This is an FHA backed loan that allows you to finance up to 10% more than the appraised value. What is great about this loan is that you get to customize the property, that you plan on living in, to your liking!
If you are reading this article, maybe it is because you are considering purchasing a home. Typically, people who just invest in a home become “house poor“, i.e. you just spent a ton of money on a home and will have to be mindful of your budget. Obviously, the point is to purchase a home that is within your budget, but you will have to come up with a down payment (which usually represents a good sum of cash). Talking to an MLO will allow you to get a good idea of what you can afford.
The biggest thing you can do to save money on your heating/cooling bill (which represents 30% of your utility bill), is to insulate your home. Download this Free Home Energy Audit Guide to see what measures you can take to save money and the environment. Our electricity comes from burning coal and fossil fuels. Insulating your home is good for your budget, the environment, and lung health. You can’t go wrong!
The goal of Eco Economic’s Increase Your Financial IQ Course is to explain how to understand and win the financial game in terms that everyone can understand.
For now, if you have any questions about the material that I have written about or want to know more about a specific topic, post a comment below!