How to Retire in 10 Years (without investing)
Every Sunday I send out something to think about, a question to ponder and something to try to make your life a little more pleasant. The idea is to inspire and encourage positive change. Readers share their progress so we can all benefit from the learnings.
THINK
“Most people overestimate what they can do in one year and underestimate what they can do in ten years.”
Bill Gates
What could you do in ten years?
Could you become financially free?
Let’s take a look at two different approaches over the span of a decade and see how they play out…
1) Rich Rob
‘Rich Rob’ takes home £400,000 a year after tax. He spends £360,000 a year to afford his lifestyle and saves the remaining £40,000 (10%) of his earnings.
He saves £40k a year. This sounds like a lot of money, but it’s not to Rob.
After 10 years, he would have just over 18 months’ worth of income (£40,000 x 10 = £400,000).
Let me underscore this. He would need to work for 10 years to afford just over 1 year’s worth of his lifestyle. Retirement is decades away for Rob.
2) Minimalist Mike
‘Minimalist Mike’ takes home £100,000 a year after tax. He comfortably lives on £20,000 a year and saves the remaining £80,000 (80%) of his earnings.
He saves £80k a year. This sounds like a lot of money, and it is to Mike!
After 1 year he’s saved 4 years’ worth of living expenses. (£80,000 / 4 = £20,000).
He can live for 4 years on his lifestyle, after working for 1 year.
If Mike continued his savings rate for 10 years, he’d have £800,000. If he only needed £20,000 to live on, he would have saved 40 years’ worth of living expenses in 10 years.
Mike could work from 30-40 years old and have enough saved to live on until 80 years old.
Let me underscore this. He would need to work for 10 years to afford just 40 years’ worth of his lifestyle. Mike is effectively financially free.
But what about x, y and z?
“But living on £20,000 a year is impossible“. It’s not.
“But I’m not earning £100,000 a year“. You can.
“But you haven’t factored in inflation“. I know, I didn’t for simplicity.
I receive comments like this ALL THE TIME on social media. But, but, but…
But if your aunt had bollocks she’d be your uncle.
STOP finding reasons why you can’t do this. START finding solutions to why you can.
I haven’t even mentioned investing the money into stocks or property to compound wealth to keep it simple.
10 years of 8% returns:
- Rob = £625,820
- Mike = £1,251,639
The point I want to illustrate is that when you choose to live on less, you dramatically decrease your timescale to freedom.
I could use an even more EXTREME example…
If you could live on 10% of your wage and invest the remaining 90% into stocks/property, yielding 10%, you could retire in one year!
“But I don’t want to live in poverty. What sort of life is that?”.
🙄
1) It’s only poverty in your mind due to your perception. Not reality. Another perception is that you’re creating life-changing wealth that will feed you forever. You get to decide.
2) Spending money doesn’t equal happiness.
3) Recreation isn’t the only form of joy.
4) Hard work, discipline and consistency lead to true fulfilment.
This stuff isn’t easy, but what truly meaningful things in life are?
Find ways to earn more and spend less and you’re well on your way.
It’s so simple no one will do it.
Reflect and share this with someone.
ASK
If you’d like to become financially free in 10 years, consider the following:
“When would I like to be financially free and is my current savings rate supporting that?”
“What ONE thing could I start doing or stop doing to move closer to that?”
Write down what comes to mind.
TRY
When would you like to be financially free?
Calculate your current savings rate and see if it’s in line with your freedom goal.
It’s OK if it’s not. Most aren’t but at least you know.
Remember:
“People overestimate what they can do in one year and underestimate what they can do in ten years.”
Try setting a goal of increasing your savings rate to the nearest 5% milestone.
Try implementing ONE thing that increases your income or decreases your expenses.
You can dramatically transform your finances in a decade. Starting today.
Remember: Little by little, a little becomes a lot.
SHARE
Comment below and share how it went for you.
SHARE what you’ve done to retire in 10 years this week.
