How To Retire In Your 20s


How To Retire In Your 20s Blog Image

In this video, I’m going to share the steps on how you can retire by 30. For most people, this is little more than a dream, and they have no idea how you can retire early. But, with the right plan in place, financial independence by 30 is not only realistic but achievable.


In the first part of the video, I’ll explain that you need to shift your mindset if you really want an early retirement. Retiring this young isn’t going to be easy, and if you’re serious about this, you’re going to have to make some sacrifices.


I’ll then talk about practical ways to get yourself ready for investing in assets by sorting out your personal finances, like clearing credit card debt and building an emergency fund. Once these foundations are in place, I’ll show you how you can start accumulating cash through a side hustle, giving you more disposable income to buy assets.


And in the final part of the video, I’ll show you how to invest to create several passive income streams. I recommend investing in real estate, the stock market, and cryptocurrency. Investing in these assets will help you to detach your time from your money, allowing you to sip on cocktails whilst your bank balance grows.


So, if you want to achieve true financial freedom, make sure to watch to the end.

Defining Retirement

So many people get the wrong idea of retirement these days. We think that all we need to do is work hard while we’re young, build up our pension, and then live happily ever after. But in reality, that’s just not the case. In the UK alone, the average pensioner receives just £246 per week, which is barely enough to cover living expenses, let alone new experiences and possessions. It’s crazy to think that living just above the poverty line is the idea of a happy ending for most people, but that’s just the sad reality. And if you want to escape this way of living, working a 9-5 paycheck to paycheck isn’t going to cut it.


Others like the idea of mini-retirements. This phrase was first coined by Tim Ferris, who suggests that you should work hard on a small business or project, cash out and enjoy a small period of retirement and then get back to work and repeat. Sure, this is a step up, but you’re still going to be bouncing from retirement fund to retirement fund without any true financial freedom.


Neither of these ideas are good enough for you and me. I want you to change the way you think and view retirement as freedom. Retirement shouldn’t be seen as this ‘end goal’ that you only get to cash in on after you’ve worked for 40-plus years. It should be seen as the opening to a new way of living. To put it in the words of Fred Rogers, “Often when you think you’re at the end of something, you’re at the beginning of something else.” 


5 Step Plan for Retirement

With that being said, let’s figure out a concrete plan that you can follow step-by-step to grow your wealth and be able to retire before your 30th birthday. View these steps as little milestones. As you achieve each one, you’ll be able to move on to the next stage and get ever closer to your dream retirement.


The plan I’ve come up with can be achieved in five steps. Let’s take a look at each step in a little more detail.


Step #1 Mindset Shift

So, step one is to completely shift your mindset. Now, I want you to listen to this next bit because it’s important. If you’re serious about retiring before you’re 30, you’re just not going to be able to live as everyone else does in their teens and 20s. Whilst everyone else is out partying, drinking, and getting high, you’re going to be working.


You just have to take a look at pretty much every successful entrepreneur’s schedule. Alex Hormozi is up at about 5 am every day. Elon Musk frequently puts in 100-hour work weeks. You’re not going to be able to work this hard if you’re burning the candle at both ends and partying every weekend away.


I also want you to try and refrain from keeping up with the Joneses. Every single cent is valuable when you’re trying to retire in such a small amount of time and buying a car that you can’t afford or that new Gucci top that, to be honest. looks like crap isn’t going to help you achieve your goals.


I love the way that Morgan Housell, who wrote The Psychology of Money, likes to frame this. He talks about sacrificing what you want for today for potentially infinite rewards in the future. And when you think about it, he’s totally right. If you can refrain from that new BMW or Rolex for a few years and sacrifice your social life, all for complete freedom- that’s gotta be worth it, right?


So yeah, times are gonna be hard for a few years. You’re going to need to work hard. You’re going to need to sacrifice your social life and let go of impressing others. But everything has a price, and if it didn’t, everyone would have retired years ago.


Step #2 Finding the Magic Number

So, once you’ve got to grips with the reality that retiring by 30 isn’t going to be an easy path to take, it’s time to find the magic number that will allow you to sit back and relax for the rest of your life. This is the number that you’re going to work for years to achieve, so it’s a good idea to give it a good amount of thought. I mean, the last thing that you want is to underestimate how much money you need to invest, right?


So, the precise retirement figure is going to vary from person to person, but there is a formula that can help you out with this. An absolute genius called William Bengen came up with something called the x25 rule, which allows you to calculate how much money you’d need in the stock market to be able to withdraw a fixed amount each year.


Let’s break this down a little bit. Say you wanted to live off $75,000 each year. We’d multiply this by 25, which totals 1.875 million. The basic idea is that you could comfortably liquidate 4% of your portfolio, $75,000, with this much invested, and your portfolio would never decrease in value year-by-year, according to market averages.


By now, I know what you’re thinking. Dylan, how on earth am I ever going to earn nearly $2 million, I can barely afford a McDonald’s right now! But hear me out, this is where the rest of the plan comes in. If you have an actual fixed amount of money to work towards, you’re doing better than 99% of the population. You’ve got the end goal, and now it’s simply a matter of getting there in baby steps. Let me show you how.


Step #3 Clearing Debt and Building an Emergency Fund

So, we’ve got our plan for retirement in place, and now it’s time to start taking the steps to achieve this plan. And the first thing that you’re going to want to do is to give yourself a bit of financial security. A lot of the time, people hear about earning a 10% return on their money and immediately dump every penny they have into an index fund without even thinking about their high interest debt or out-of-the-blue expenses.


Don’t get me wrong, getting started with investing is the right attitude, but before you jump head-first, it’s a good idea to build yourself a bit of financial security. This starts with clearing off any high-interest debt that you may have. A recent study found that around ⅓ of Americans are carrying credit card debt from month to month. The interest on this kind of debt is absolutely obscene, and it’s much better to use any money to clear that off before you start investing because an APR of 30% is always going to outpace a 10% return on investments.


To pay off any debt that you might have, there are two main methods to use. The first method is called the ‘avalanche’ method, where you pay the minimum payments on all of your debt at the end of each month and use any leftover money to pay off the highest-interest loan. And over time, all of your debts will suddenly be paid off, a bit like how an avalanche suddenly comes out of nowhere! The second way is the ‘snowball’ method, where you make all of your minimum payments and then use anything left over to attack your smallest debts. This makes your repayments a bit like a snowball which gradually picks up momentum as you keep paying off debt and don’t have to worry about further payments. 


Now look, if you are in a lot of debt, I don’t want you to worry. The average American is in about $11,000 worth of debt, so you’re probably not doing as bad as you think. And even if you are in more debt than everyone else, you can still work hard and achieve financial freedom. I read about this guy called Scott Alan Turner last year. He had a net worth of minus $70,000. But, by 35, he was a self-made millionaire and had achieved financial freedom. There’s no reason why you can’t, either.


Once you’ve got yourself out of debt, it’s time to build an emergency fund. An emergency fund is a small pot of cash that you can use if anything unexpected comes up, like a medical bill or even if you’re fired from your job. Now this is going to stop you from going back into debt because you’ll be able to cover anything unexpected that comes your way. I can’t stress the importance of an emergency fund enough, especially when you consider that around 60% of Americans are living paycheck to paycheck. Vanguard founder John C. Bogle recommends about six months of living expenses as a general rule, which is a great place to start. 


Once you’ve got your debt cleared and six months of savings saved in cash, you’re ready to begin your aggressive investing journey. Now, I want you to listen to this next part closely. Whenever you invest, you should be investing in a tax-free account. No one likes taxes, and if you invest in a taxed account, you’re going to have to give away nearly 20% of your capital gains. So, get yourself both a Roth IRA and 401K if you’re in the US and an ISA and SIIP if you’re based in the UK. This is going to allow you to invest without having to share your profits with the tax man, ultimately helping you achieve retirement sooner.


Step #4 Accumulating Cash4

So, we’ve got everything in place. Now the fun begins, and it’s time to accumulate cash like there’s no tomorrow. The way that we’re going to do this is by having multiple income streams alongside your normal job. It’s a well-known saying that millionaires have around seven streams of income, and if you’re going to achieve financial freedom before most people even begin to consider their future, you’re going to need several streams too. Not only will this give you greater confidence and security, because if one income stream dies, you’ll have another to rely on, but it’s also going to allow you to just earn more money. And if you want an early retirement, earning more and more should be at the top of your priority list.


So, how can we build multiple income streams? Well, I’ve got two words for you- side hustles. A single 9-5 job just isn’t going to provide you with the income that you need to accelerate your retirement plan. But, if you start a side hustle alongside your job, you’ll be able to start investing in passive income streams and get one step closer to financial freedom.


Now, there are hundreds of side hustles that you can start this year, from photography to car cleaning. But, to help you make up your mind, I’d like to share an interesting statistic with you. A recent study found that 88% of millionaires earned their money through a business. So, if you want to bring in the big bucks, it’s probably a better idea to devote your evenings to starting a business that has the potential of earning millions per year rather than something like a freelancing side hustle that might bring in a few hundred each month. And out of all the businesses you could choose from, the easiest to start is almost always going to be a drop-servicing model, where you connect businesses that need certain work to be done with freelancers who have the skills to get that work completed. This kind of model can be run by anyone, regardless of skill set and experience, and has the potential to earn you unbelievable sums of money.


If you’d like to learn more about drop-servicing, I’ve dropped a really useful training resource in the description. It’ll give you pretty much everything that you need to know about this business model.


Step #5 Transitioning to Passive Income

So once you’ve got your side hustle up and running, you’re going to be able to transition into passive income. Passive income allows you to earn money whilst you sleep and is the one secret key to achieving financial freedom. Passive income is like sending your money out to work- each day, it’s going to come back with more money for you to invest and compound. Passive income also allows you to disconnect your time from your ability to earn money, which is ultimately the end goal, right?


And building passive income streams is actually a lot easier than you might think. There are three main streams that I want to talk about today. These are the stock market, cryptocurrency, and real estate. Let’s take a closer look at each one.


So the stock market is probably the easiest way to grow passive income, and contrary to popular belief, you don’t need to be an expert in investing to get started. All you need to do is sign up to a platform like Vanguard, open an Index Fund, and put as much money into it as humanly possible. When you invest in an index fund, you’re not relying on a single stock to go up, so you run a much lower risk of losing your money. You’re basically counting on the economy surviving, and no one has ever lost money if they’ve invested in index funds for more than 30 years. So, the goal here is long-term investing and remembering that time in the market is more important than anything else.


So how does index fund investing build passive income? Well, it’ll help you build your wealth through something called capital gains. Capital gains are basically the financial reflection of your investments increasing in value. This, coupled with compound interest, which is where you start to earn interest on your interest, is going to allow you to withdraw that magic 4% of your income a year without your portfolio shrinking. Many stocks also pay a small dividend, which is like a small thank-you bonus that you get each year for investing in a company. Dividends can be reinvested into your portfolio too. 


The second stream of passive income that I recommend you focus on is crypto. Now, don’t get me wrong, the days of dogecoin and overnight crypto-millionaires are long gone, so investing in an alt-coin probably isn’t going to make you rich anymore. That being said, crypto is a great way to diversify your portfolio and earn passive income as your assets increase in value. You can even stake your coins for high-interest rates for cash flow. It’s worth noting that crypto is a much more volatile market than stocks, so you should only invest a small amount into established coins. Otherwise, you’re basically gambling!


Now, the final passive income stream I want to talk about is real estate. There’s a reason why 90% of millionaires are invested in real estate- it’s because this is one of the most efficient ways to grow your wealth. Real estate, like stocks, increases in value over time. But on top of this, you’re also getting the added benefit of monthly cash flow from tenants, who will literally pay your mortgage for you and give you extra cash at the end of each month, which could be used to build up your passive income streams even further!


Now, nothing in life is free, and that statement rings very loud when it comes to real estate. Saving for a deposit and securing good tenants isn’t an easy or cheap thing to do. But, if you can save up the money, you’re going to be rewarded.


Now, if you are just looking to taste what real estate is like, you could consider investing in a Real Estate Investment Trust or a REIT. These are basically like stocks for property and allow you to invest in a tiny portion of a commercial property. Just make sure you do your research before you invest. 


Reaching your Goal

So, if you follow these steps, invest in assets, and build passive income streams, you’re going to be able to achieve financial freedom by the time you’re 30. I’m not saying it’s going to be easy, but if you’ve got a plan, all you need to do is start. Once you get going, seeing your net worth get closer to your end goal is going to become like a game, and before you know it, you will have achieved your financial dreams!