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.

Obviously, the goal is to get your money to work for you while you sleep and to earn income that is taxed at capital gains rate

Learning from the Top Minds in the Financial Industry:

Saving and investing UnshakableIn the book “Unshakable” (the book after “Money: Master the Game“), Tony Robbins condenses the advice from 50 of the most successful financial experts alive today.

In this book, he gives you a step-by-step, actionable plan that can be used by anyone at any financial level.

Money: Master the Game” and “Unshakable” provide you with a blueprint for financial freedom. These two books contain wisdom from world-renowned experts.

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 Renewable Technology. 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. Saving and investing Money Master the game

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. 

Money: Master the Game” and “Unshakable” are the perfect books to start your journey of being a life-long student of success!

 

Financial Freedom: Your Retirement Number: 

 

According to Tony Robbins, you will need to earn 20x your current yearly income to retire.

For example: If you earn $100k per year, your financial freedom number to retire is $2 million.

My Recommendation: The goal is to save, re-invest, and obtain cash flow that is taxed at capital gains rate.

Capital gains rate is so special because it is taxed at 20%, instead of an individual’s regular income tax rate (10%-37%).529 plan . Federal income tax rate

Typically, cash flow comes from real estate, equity ownership in a company, dividends, and interest. All of these are higher level income streams, also known as passive income.

With respect to the stock market, Tony Robbin recommends dollar cost averaging and using a “buy and hold” strategy.

As most of us know, the stock market has “bull” and “bear”  cycles. A “bull market” is when the market is increasing, and a “bear market” is when the market is declining.

Tony’s research shows that bear markets last a maximum of 2 years, and happen every 3-5 years.

Bear markets have occurred once every 3 years, for the past over 100 years.

Moreover, throughout Money: Master the Game” and “Unshakable”,  every major investor Tony interviews expects bear markets to occur.

The Power of Dollar Cost Averaging:

 

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.

In another blog post, I discuss how on average over any 40 year period the aggregate stock market increases 7% per year. This includes the downturn bear market years.

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

How to Diversify your Portfolio Through an ETF:

Research shows that 75%-90% of money managers (professional stock pickers) do not outperform their benchmarks (like the S&P 500).

Additionally, money manager’s charge a fee to manage your portfolio.

  1. Typically, they either take a percentage of assets under management. Example: 1%-3% of whatever assets they oversee in your portfolio or
  2. They charge a flat fee for every trade transaction completed. Example: $15 per stock trade.

Without exception, every financial expert that Tony interviews recommend a diversified portfolio.

Moreover, the general consensus is that an individual should invest in at least 6 asset classes.

These asset classes include:

  1. US stocks
  2. International stocks
  3. Emerging market stocks
  4. REITs
  5. Long-term treasuries
  6.  TIPs.

 

As always, I urge you to invest in your future by becoming a life-long student of success!

Every 10,000-mile journey starts with a first step. Get started learning the fundamentals of finance with Tony Robbin’s  Money: Master the Game” and “Unshakable“!

Which cash flow investment are you most interested in and would like me to write about? Comment below!

 

Photo credit

2018 Income tax rate

 

 

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Lynzee Lai

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