Lots of Rules
Our tribe has been on the quest for Very Early retirement for the last 7 years. Here is a list of all of the key rules we have followed down this road:
- Set out with the end in mind - very early retirement (financial freedom) in school! - a good job that pays well - yes it is nice to think about being a wealthy pop star but what percentage of the population are that famous? By all means have it as a hobby and perhaps you will excel in it if it is your passion. Consider a growing industry that you have a real passion for to enter for a career. It will be the best to negotiate higher wages. Computers were the pace to be in the 1980's - 2000 perhaps bio technology, graphine or renewable technology are the upcoming areas now.
- Get stuck in at a young age - It is better to screw up at a very early age and learn the lessons early instead of later in life when it can cost money and time.
- Wait and research before you buy. NEVER buy on impulse. Are you buying an asset (e.g. property, shares, woodland, precious metals) that will provide an on going passive income or a consumable? Is the consumable necessary (e.g. food) or a want (e.g. electronic device)?
- Buy consumables in bulk to cut down costs ideally at the local low cost store.
- Use deal opportunities on consumable product (even if you don't regularly buy them such as out of season tissues) BUY them to cut down your bills. For example we buy 6 months worth of a product when it is on half price.
- Have a weekly \ bi weekly shopping list to avoid 1. buying stuff you don't need and 2. Cut down any commutes to the store.
- Even better take the free and healthy option t walk \ cycle to your store or school or work....
- Buy a cycle and learn how to maintain it.
- Consider renting - if the housing market is historically overpriced wait and rent. All of that capital can be used to invest and grow your savings. When a housing crash comes you will be quids in when you buy!
- Keep a reasonable amount of cash to buy equities \ stocks \ real estate after a crash - they naturally happen on a regular basis.
- Get a partner and move in together - first of all it will make you very happy and you get some extra exercise to stay healthy;) Secondly your day to day costs will be reduced significantly and your savings will hopefully skyrocket. Space tourism here we come!
- A bit controversial - Delay having children until you have a good amount of money in the bank and your career is progressing
- Holiday close to home (or within reason such as the same continent) - going to another continent means expensive flights, visa costs, tourist tariffs, injections, special clothing, extra travel insurance.... is all worth the effort? Why not see your own continent first? Only you can answer that one but in the mean time you will reduce your holiday costs significantly.
- Insulate the house - simple roof insulation, are there any grants available, draft proof the windows and doors.
- Save energy. Turn the heating down / off / only use it when you really need it. Why not put on another jumper of go out to the library to warm up? Turn off lights / appliances when they are not needed!
- Grow some of your own food - we love French climbing beans for example -very easy to grow and provide fresh delicious beans all summer.
- Same goes for cars and transport - spend less time traveling. Less car or public transport saves a huge amount of money which otherwise is just burnt as fuel. You might as well take out note from your wallet (low value) and set fire to it that is the same as a lazy drive to the corner shop!
- Start investing at a very young age - compound interest are your best friend and capital gains are king!
- Avoid debt. Credit cards - cut them up! Car loans - save for the car first and get on your bike. Student loans build up savings to avoid them and work through the holidays. The only exceptions 1. Mortgage - only if it is at an ultra low rate and locked in 2. Money to invest into an opportunity. Make sure you get rid of unsecured debt first!
- Invest for your kids at a very early age - why not set them up with good habits for life while you are at it? Hopefully they will be independent themselves at a young age and well on the road to success themselves.
- Use the local funded education system (you pay for it out of your taxes (in the UK) so why not use it?
- We will learn something new every day on education, personal development, early retirement, health. Skills can be used to create an income and save money or just for personal enjoyment such as carving some wood for home decoration.
- Do not procrastinate - to be a very early retiree procrastination kills the dream. You must get on with schooling, learning, getting things done, promoted in work, setup that part time business, get married, setup you home and learn how to maintain it. You only live once so get on with it (see point 2)!
- Be proactive (opposite of procrastinate and then some!) Go out and look for things to do. You can improve your income, skills, network of friends you name it be proactive!
- Don't try to be perfect follow the 80:20 rule 80% of results come from 20% of the work. Trying too hard to be perfect (impossible by the way) is stressful and futile as well as wastes a huge amount of valuable time and energy. For Very Early Retirement yes frugality is great but how far do you really need to go? Have a look at the highest 80% of your outgoings (caused by only 20% of your individual bills) and focus your attention on them, they will probably be dominated housing and transport - start there.
- Think ahead - list all of the things that could happen to you and the investment landscape in the future. Are there any blatant opportunities for a small speculative investment? Are there any potential catastrophes that you should avoid (finance stocks in 2008 would have been nice:)
- Set aside some time each month to review your financial progress, assumptions on the investments or protection. If you are unsure what to do sit on the cash and do not make rash decisions. Instead carry out some research on the web, talk to friends and family and even a financial adviser before jumping in head first into an investment.
- Celebrate success - do you have a goal to save 20%, 40%, 60% of your take home pay - go out and have a good time when you reach your goal and then increase your expectations:)
- Have some fun and indulge in some humor every day. Quite easy when you have the kids to look after - they light up my world - what lights up yours?
- Live life in the moment at low cost - Have a coffee with friends or a beer with your mates. Walk in the countryside. Throw a ball for the dog. Make love with your partner. Play with the kids! All of these things MONEY CANT BUY but are PRICELESS.
So what do you think? What are your rules for Very Early Retirement? Do you have them written down or in you head or is it as simple as; rule 1 save as much as possible rule, 2 make as much money as possible?
I am sure that some people will dismiss this list as a waste of time or disagree with its contents. In MUFF's humble opinion rules can help to build habits and it is these that set you up for long term prosperity (providing they are not from the government).
Try and write down a list of rules for yourself today. How long is the list - do you really abide by them? Good luck!
Peace and prosperity
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