How To Retire by 30 Years Old | Starting with $0

what's up you guys it's graham here so the other week i posted a video about how much money you should save by every age and in that video i go in detail about how much money you should be putting away every single year in order to make sure you're on track to retire by 65. but i made a mistake because so many of you begin commenting that 65 years old is too long to wait and you want to be able to retire sooner than that because you could be dead tomorrow so yeah when enough people comment wanting to retire way sooner than that then you bet i'll make a video on it and i'll go over exactly what you need to do to be able to retire by 30 years old and i'm going to be telling you all of this coming from the perspective of someone who became completely financially independent in their late 20s in fact i just recently turned 30 and i'm super fortunate to be in a position today where if i were to stop working i could cover my lifestyle indefinitely from my investments and continue to grow my net worth at the same time so yeah none of this is theory and i'm not going to be talking about any bogus hypotheticals from someone who's never done what they're talking about i'll just go over the reality of being able to retire by 30 exactly what you'll need to do to get there and how it helps to smash the like button for the youtube algorithm see that is one of the biggest mistakes and oversights that people don't realize about early retirement is that it all begins with a blue light button so once you do that congratulations you're one step closer to early retirement and with that said let's begin the video but really quick i want to thank today's video sponsor morningbrew they're a daily newsletter that gets sent out every monday through saturday and it brings you up to speed with the most important business and world news in just five minutes being able to stay up to date with the world's most current events is essential if you want to learn how to make the most of your time the most of your money especially if you want to retire early and morning brew is the perfect summary to wake up to like before i got this newsletter i would have to sort through dozens of articles and websites to try to find the information that was the most relevant but now i'm able to wake up and see their newsletter waiting for me with all the most important details and outlines just neatly summarized for me to read this isn't just news either that's typically boring dense and dry but on the other hand warning brew injects wit relevance and information that just leaves you wanting to read more for example i learned about sirius xm's deal to purchase the podcast company stitcher for 325 million dollars the biggest podcast deal in history and i also learned that chipotle is testing out a new cauliflower rice to add more healthy options into their mix this is a type of news that i never would have learned if it wasn't for morning brew and there's no reason not to join if you're interested in business finance tech or politics it's completely free and subscribing takes under 15 seconds so click the link in the description to subscribe to morning brew today and stay up to date on all the best current events sent right to your email and of course with that said here's how you could use all of that information to retire early okay so first when it comes to being able to retire by 30 i want to introduce everyone to what's known as the fire movement it stands for financially independent retired early and it's a community of people that dive into the analytics of exactly what you will need to be able to retire by any age this is a community that i've been involved in for about eight years now and it's helped me tremendously in terms of getting me to where i am today it's all about figuring out exactly how much money you need to sustain your current lifestyle without ever needing to work another day in your entire life and the math behind it is incredibly simple to start we have five different types of financial independence to aim for and i'm going to be outlining them each for you really quick because this is going to determine how you're going to be able to retire by 30. the first one is known as what's called lean fire this is a type of frugal financial independence that allows you to retire off the bare essentials without ever needing to work again you're not going to be retiring in luxury or glamour but you should be able to live in a small apartment drive a car eat some healthy meals at home and have some inexpensive entertainment again this is all about frugality as far as what it takes to get there the actual definition of lean fire is being able to retire off an income below what the average american makes of 61 000 a year so typically if you're gonna be spending less than forty thousand dollars a year in retirement then lean fire is something to aim for the second we have what's known as barista fire this one is when you have enough saved and invested to cover most of your expenses but not everything so at this point if you want to quit your job you can and then you can take on some enjoyable part-time work on the side to pay for all of your other expenses as necessary like working as a barista this is all about being able to move on to something that might pay less money but you'll have way more flexibility and way more free time throughout your day to do whatever you want next number three we have a term called coast fire this is when you've saved up enough money that it's able to grow to an amount in the future that you could be completely financially independent off without any further work or involvement or investment on your end for example if you have enough money invested in your 20s sometimes all you got to do is just let those investments grow and then at some point in the future you're going to have enough money to be able to retire off of then number four we have our normal term of financial independence this one is our typical version of retirement that most of us think about it's being able to live our normal regular lives without ever needing to work again sure you're probably not going to be driving lamborghinis all day and going and staying at the ritz carlton every weekend but still you're not going to have to worry about money within reason and you're not going to have to work if you don't want to and finally the last one we have number five and that's what's known as fat fire this is for not only the people who want to retire but also for the people who want to retire and never think to themselves hmm how much money does it cost and can i afford it this one typically means that you're going to be spending over two hundred thousand dollars a year in retirement and you'll be able to earn what most americans can only dream of without ever needing to work another day in your entire life so in order to tell you exactly how you could reach these fire milestones i'm going to be going over exactly what you'll need to do in order to get there and exactly how much money you will need and all the calculations you'll need to know it's very easy all of this at its core really just comes down to a few things and this is what you need to know one how much money do you need to spend every single year number two how much money do you currently have saved up and number three how much money do you currently make if you know the answers to those three which honestly you should know the answers to those three that's going to tell you everything you need to be able to retire by 30. and really to start how much money you spend is gonna be the most important variable to this entire calculation generally speaking if you're under 30 years old and you want your money to last you indefinitely without ever running out you'll need to only spend three percent of what you have invested every single year so that means if you have a hundred thousand dollars invested you could spend three thousand dollars a year without ever running out of money if you have a million dollars invested you could spend thirty thousand dollars a year without running out of money and so on now how much money you spend is going to greatly influence how much money you will need in order to retire because for every 100 a month that you spend you're gonna need forty thousand dollars invested for that one hundred dollars a month to last forever by that logic it also means that for every one hundred dollars a month less that you spend you will need forty thousand dollars less invested and yeah that's a substantial amount i mean that could be someone's entire year's paycheck just to spend a hundred dollars a month so once you figure out exactly how much money you're going to need to spend every year then we can move on to the next step that would be how much money do you have saved up and invested whatever that amount is just divide that by 33 and that's how much income your investments will be able to replace from there all you need to do is some super easy math to figure out how much more you will need in order to retire all you're going to need to do is take how much money you spend every single year multiply that by 33 and then whatever amount that is is how much you're going to need before you can call yourself retired this is all based on what's known as the trinity study which analyzed the investment portfolios of stocks and bonds throughout every single year in history and calculated how much you could spend from your investments throughout a 30-year retirement and that study found based on hundreds of simulations that you could spend four percent of your portfolio every single year and make sure your money lasts you for 30 years however even though a 30-year retirement might work if you're 65 or 70 years old it's probably not going to work if you want to retire by 30. so in order to preserve more capital so you could retire for a longer period of time it's instead recommended you do a three percent withdrawal rate so for example if you spend 40 000 a year just multiply that by 33 and you're going to need 1 million 320 000 if you want to be able to retire by 30. if you want to be able to lean fire off 25 000 a year then again just multiply that by 33 and you're going to need 825 000 invested to hit that goal then if you want to be able to fat fire off 200 000 a year in retirement again multiply that by 33 smash the like button and you're going to need 6.6 million dollars invested and that's pretty much all the basic math you're going to need to know now obviously if you have higher yielding investments like you're investing in real estate that gives you a 5 return the same calculation also applies just modify it slightly for whatever you're investing in and finally the last factor in this equation and that would be how much money do you currently make this is going to tell you how long it'll take for you to hit that retirement number and whether or not you'll have to earn more money to want to get there sooner being able to retire by 30 is not easy and it's not cheap per se so if you're currently making 30 000 a year saving none of it and expect to retire with 40 000 a year in passive income with a 1 million 320 000 nest egg you're gonna need to find a way to make more money and you're gonna be able to calculate that by taking your current spending multiplying that by 33 then subtracting what you currently have invested and saved and then whatever's left over is how much more money you will need to make from there calculate how much more money you'll have to make to get there by 30 and it's probably a very big number now let's get into the parts that i'm sure all of you are interested in and that's how you could retire by 30 years old now obviously this is going to be way different if you're watching this at 29 and a half years old and you're like but graham i can't retire in six months at 30 years old versus someone else who's watching this at two years old and you're starting to save as you're learning to walk so we're going to be opening this up instead to how to retire in your 30s so that way way more people are included but regardless the strategy is exactly the same now the blogger mr money mustache did the calculation for us and calculated how long you will need to work compared to how much money you save in order to retire using the four percent rule he determined that if you're able to save and invest 70 to 90 of your income you would be able to effectively retire within 10 years of working let me say that once more because i'm sure some of you are just partially listening to this and zoning out hey listen to this right now right now if you're watching it listen just listen to this if you're able to save 70 to 90 of your income for 10 years you will have effectively saved up enough money to continue your current lifestyle indefinitely and be able to retire without ever needing to work ever again but of course though he did find because of math that the less money you save the longer you'll need to work for but once you're able to start saving a significant portion of how much money you make you'll be able to cut down the time required to retire significantly wait a second the time required to retire the time required to retire that that's really hard to say but anyway for example if you make 70 000 a year then theoretically you should be able to retire in 10 years if you only spend 21 000 a year doing that is going to let you live indefinitely with that same lifestyle after those 10 years and then anything else you make after that is just icing on the cake but really the big picture here is that you're not going to have to need to work unless you want to as long as you just keep your spending the exact same so number one a high savings rate is a must if you want to be able to retire early or especially if you want to retire at 30 years old realistically most people are probably going to have to save above 80 percent of their income if they want to reach this goal at a young age like it or hate it that's the reality of what you will need to do practically if you want to retire by 30 you'll either have to make a lot of money or spend very little money but assuming you guys just want to make a ton of money to be able to retire as quick as possible i'll give you the rundown and go over the details of what's required most likely unless you're making a hundred thousand dollars a year in a high-earning job right out of college while simultaneously living just a few steps above homelessness you're not going to be able to retire by 30 while working a traditional job if you're already making a ton of money then it really just comes down to cutting back on your spending living frugally investing as much money as you can and then it's only a matter of time and for everyone else out there who wants to be able to retire by 30 and make a ton of money is to work a career that pays you based off your results and not based on your time the biggest problem i have about getting paid for your time is that there's only 24 hours in a day so if you're working hourly or you're on a salary eventually you're going to hit a ceiling in terms of how much income you can make and once you hit that there's just no more hours in the day on the other hand if you get paid on your results then theoretically you should be able to find a way to streamline those results so that you could end up making way more money without necessarily working any harder i'll use myself as an example i started out as a real estate agent how many hours i worked was completely irrelevant i only got paid when i sold the house and i was able to leverage my time a lot better by focusing on the houses that i knew i could sell the quickest and in the areas where i knew i could make the most amount of money even here on youtube it's the exact same work for me to make a video to reach 10 subscribers as it is for me to make a video that reaches 2 million subscribers even though funny enough now i end up working way harder but you get the idea it's essential that you work in a career where you could leverage what you do and make more money without necessarily working more hours that's why i believe the best business to be in today is anything that you could do from your computer on the internet or anything paid on commission if you use your time efficiently you could end up making way more money very early on and that's going to help you retire sooner or amount of work and you'll later to be involved in this for years in order for it to be successful but if you want to be able to retire within a decade you will most likely get there by working for yourself and really at the end of the day if you want to end up making a lot of money to be able to retire really quick you have to completely decouple the notion that the harder you work and the more hours you work the more money you will make because that is not true at all secondly one of the ideas that i read from the book the millionaire fastlane just summarizes this perfectly think like a creator not like a consumer instead of watching and consuming youtube videos start creating youtube videos instead of going and consuming and buying t-shirts and clothing online sell the clothing online instead of not smashing the like button smash the like button you get the idea you need to begin creating value and building something not just using and consuming and finally you're going to have a much better chance at making a ton of money if you thoroughly enjoy what you do i've said this all the time but if you absolutely hate your work there is no way that you're going to be able to perform at a high enough level to get good at what you're doing to be able to make a ton of money and retire within 10 years everyone that i've met that's been able to retire in their 30s has had a passion for what they do and i don't think that's by random fluke find something you like create a business that pays you around your results and then leverage to scale that up to make even more money and i'm sure at this point some people might like mentioning some wild investments like buy test the cut options or buy crypto but overall the riskier the investment and the higher the payouts the higher the likelihood that you're going to end up losing money you're not making anything at all so at that point you may as well just go and buy lottery tickets because if that works then yes that's how you could retire by 32. and because everyone wants specifics with this stuff with real numbers here you go if you're 20 years old right now and you want to spend 50 000 a year in retirement at the age of 30 then you will need 1 million 650 000 invested that works out to you needing to invest 93 000 a year at an average of an 8 return on your investments to be able to reach that goal that means if you could find a way to average a hundred and fifty thousand dollars a year in income throughout your twenties before taxes while only spending twenty two thousand dollars a year that's what it takes to be able to retire by thirty years old with fifty thousand dollars a year in passive income indefinitely then if you want to retire off of 40 000 a year just apply the same calculation as we just did and that means you will need to invest 75 000 a year over 10 years and if you want to spend 25 000 a year in retirement then you could do the same thing by investing 48 000 a year for 10 years this all assumes you start at the age of 20 and keep your spending the exact same some investments might definitely speed things up a bit depending on how involved you want to be like with real estate like if you're able to save 50 000 then you could use that as a down payment to go and buy a 250 000 home and if you search hard enough for a deal you might be able to buy a place worth two hundred and eighty thousand dollars but only pay two hundred and fifty thousand dollars for it thereby giving you thirty thousand dollars extra in free equity then let's assume you spend twenty thousand dollars more fixing it up and now it has a market value of three hundred and thirty thousand dollars in that case you've spent seventy thousand dollars and you have a property worth 60 000 more than what you've paid for it so essentially you've pretty much doubled your money in about a year if you're able to do something like that every 12 to 24 months then you're able to hit the retirement age much much earlier especially if that property is generating way more than a three to five percent return it's all about trying to get your money to work for you while also living frugally while also trying to make as much money as you possibly can i know some of this might seem like yeah graham that's obvious but the reality of early retirement is really just numbers you must make enough money to be able to save 70 to 90 of your income for a matter of 10 years and at its core that's what it's going to take if you want to retire by 30. i was able to do this through a combination of living really frugally like throughout my entire 20s my net out of pocket cost every single month was fifteen hundred to eighteen hundred dollars even though at the time i was making a hundred and fifty thousand dollars a year or more and also i never increased my quality of living until i had enough money invested to be able to sustain it indefinitely even now that i've moved into a new spot that actually costs money because i'm not renting the entire thing out i made sure my investments would be able to cover that cost so that i'm never spending more than i make for my investments and that's what's given me the freedom to have the choice to retire whenever even though i absolutely love working and i have no plan on stopping anytime soon but overall that's the guide if you want to retire at 30 years old there's no magic pill out there there's no one way to make this happen but it all really comes down to how much money are you saving how much money are you making and how much money do you want to spend in retirement and it really helps significantly to leverage your time get paid on results save your money invest consistently and as usual smash the like button for the youtube algorithm so with that said you guys thank you so much for watching i really appreciate it as always make sure to subscribe hit the notification bell also feel free to add me on instagram i post it pretty much daily so if you want to be a part of it there feel free to add me there as on my second channel the graham stefan show i post there every single day i'm not posting here so if you want to see a brand new video from me every single day make sure to add yourself to that and lastly if you guys want your two free stocks use the link down below in the description and weeble is going to be giving you two free stocks when you deposit 100 on the platform with one of those stocks potentially worth all the way up to 1 dollars so if you want your two free stocks and get two stocks closer to early retirement at 30 use that link down below let me know which two free stocks you get thank you so much for watching and until next time

Channel: Graham Stephan

Views: 1,152,820

Keywords: investing, investing for beginners, investing in your 20s, how to invest, how to invest in real estate, how to invest in stocks, stock market investing, stock market investing for beginners, stock options, robinhood, robinhood app, best stock trading app, how to be a millionaire, how to be a millionaire in 3 years, credit score, credit score explained, credit card, credit cards for beginners, passive income, how to build wealth, how to build wealth in your 20s, real estate 101

Id: 5S2cRNveZgg

Length: 18min 37sec (1117 seconds)

Published: Fri Jul 24 2020