You don’t have to be a unicorn to enjoy financial freedom before you turn 62
Over dinner on my 30-[redacted] birthday, my partner and I were waxing poetic about our life goals. They range from small (getting an "adult" couch and a second dog) to large (buying a home outside of Brooklyn for said dogs to roam free). But the fantasy wore off by the time we got our entrees. Neither of us are anywhere near financial independence and have more questions than answers on how to build wealth outside the typical 9 to 5 gig.
Reality pairs well with Prosecco and aging, FWIW, so like many millennials and Gen Z seem to be doing, I decided to explore my own potential exit strategy. With some sage advice from a savvy financial podcaster, tons of research, and help from Personal Capital’s free tools, I've learned a thing or two on the topic, so you don’t need to wonder if you’ll need to work until you're in your 60s or 70s. Spoiler alert: you don’t. Let’s dive in.
Thanks to social media, insight into that billionaire lifestyle has been more visible than ever. And the concept of unicorns, private companies valued over $1 billion, has also moved the idea of the exit strategy into the zeitgeist.
It’s something that we can all start striving (and planning) for, even if it looks different for every person. For some, it means the ability to stop working entirely. Others might keep working, pursuing passion projects or taking on side hustles full-time. At the heart of this idea is the modern concept that work is optional and early retirement is feasible. By achieving financial independence, we are the ultimate architects of our time—and how we want to spend it.
Personal Capital's free net worth calculator is a simple way to see where you stand financially. It can give you a quick estimate of your net worth based on your assets—of which I have none—and liabilities—of which I have many. Then, you can get smart about investing your money in a way that makes sense for you.
I don't know the exact right way to invest for me, but I know one thing for certain: throwing every expendable dollar you have into a 401k is not the move. You can't touch it without penalty before 59 ½ years of age with very few exceptions—and remember, I'm 30-[redacted].
To start, I tapped Kyle Ryan at Personal Capital for guidance. Having a personal exit strategy means thinking about what your road to "retirement" looks like and one school of thought on this is known as the FIRE movement (Financial Independence Retire Early). Those practicing FIRE are saving with the goal of leaving their 9-5 long before they reach 65 (some of them are retiring as early as 30 years old).
According to Ryan, the concept of FIRE boils down to five things:
To be fair, FIRE may not be for me, but if it were… I have both a ROTH and traditional IRA, as well as money invested in stocks. That's something, right?
Turns out spending three hours on social media every night isn't completely useless, Mom. In addition to Personal Capital's tools and advisors, creators are posting about FIRE, frugality, and investment options regularly.
Andy Hill tackles early retirement strategies on his show Marriage Kids and Money, which frequently features young millionaires, financially independent couples, and debt-free parents to help his audience think more critically about their own financial success and exit strategies.
With more than 350 episodes, the podcast is a byproduct of Hill achieving Coast FIRE—saving enough for retirement so you can pursue part-time work or passion projects instead. "At the beginning of our marriage, my wife and I were spending nearly all our money. We'd save and invest some, but we really didn't have a purpose or goal behind it," he says. Eventually, that goal became clear: "I wanted time to take care of my health, pursue my interests, and be the present parent and husband I've always wanted to be."
Hill and his wife began by eliminating $50,000 of student debt in about a year. They did this by committing to living off half their household income (about $180,000 at the time). By 40, they had saved $500,000 for retirement—which will keep growing with compound interest—and by 45, paid off their $500,000 mortgage.
"Now that we don't have to worry about paying any debts, and we've essentially built our own pensions with Coast FIRE, my wife and I have the ability to work part-time," says the family finance coach referring to the esthetician. "We're now living full-time, instead of working full-time.”
The strategies are simple: reduce living expenses, contribute to retirement funds, eliminate debt, seek out advice. It’s practicing them that can take some getting used to. Alas, in addition to social media, blogs, and podcasts, fiduciary financial advisors can offer guidance on what it would take to set your personal exit strategy in motion.
Don't look at me for which stocks to buy. The market changes as quickly as trending hashtags do. Consider low-cost index mutual funds or index exchange traded funds (ETF), real estate investment trusts (REITs), and aforementioned IRAs. You can also opt for completely untraditional options like investing in the creator economy AKA a side business), or art and fine jewelry that may appreciate in value.
My last words of parting wisdom are these: Sit down and think (always over drinks and dinner when possible) and start contemplating your own exit strategy. There's a lot of life out there. Yes, even beyond social media.
Personal Capital compensated Author for providing the content contained in this article. This content is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. Author recommends Personal Capital’s Free financial tools and is not an investment client.
From: Esquire US