The big news in consumerism capitalism this week is that Instagram is introducing Checkout, a new feature that will allow users to buy products directly within the app.
Our minds can’t wrap around how fast compound interest happens. It’s basically magic, both dark and light. Seth Godin this week shows it in a great post about the $37,000 latte.
The one crazy outlier: someone told me yesterday that she and her husband have saved $64,000 in the 18 months since they took FF1. Holy crap. It was a combination of improved defense and much much more offense.
We believe in the “pursuit of happiness.” It's in our founding document. Read that again: the pursuit of happiness. Doesn't constantly pursuing something sound exhausting? Doesn't constantly reaching for something make us uncentered? If we’re always wanting, are we ever settled? Do we ever catch happiness and possess it?
It occurred to me on my trip that financial freedom fits within prospect-refuge theory. In the course I talk a lot about FIRE (financial independence, retiring early) in terms of freedom, the ability to own every hour of your time. You get to do what you’re passionate about, with the people you care about, in the amount that you want. You get to live your life creatively. But I don’t think I emphasize the security portion of FIRE enough. Since I “crossed over,” I simply worry about money less. Of course I still have a budget. I don’t spend frivolously. But having financial freedom means I simply feel safer in the world.
The miracle of compound interest means that saving $5,000 a year and consistently earning 6% on it (after inflation) creates a $841,000 nest egg after 40 years. Using the 25x rule, that produces $33,000 in yearly retirement income. The key is earning 6% after inflation.
One great idea from the book "Your Money or Your Life" is the concept of "real hourly wage." You probably know your nominal hourly wage, what your employer pays you. The book makes you calculate how much extra time and money it takes for you to make that hourly wage.
Someone in my current cohort of Financial Freedom 1 asked: "Wait, so you are saying that with a life of ascetic virtue I can quickly (somewhat quickly) 'retire' to live a life of… ascetic virtue?"
About 30% of Americans aged 55 or over have no retirement savings. Another 26% have less than $50,000 of retirement savings. Most people will depend on Social Security as their main source of retirement income.
Do you know your savings rate?
Your savings rate is the percentage of income you don't spend that you put away for retirement, emergency expenses, and rainy-day savings. It's the money you're paying to your future self. You know, the person who's probably not going to be working from ages 65 to 85.
Here's a short case study of Olivia and Devin, who took the course this year. Two things I love: they're now able to talk more openly about the financial future. And Olivia has the knowledge and plan to retire in 16 years!
Most people have never been asked to contemplate the question: "What do you hope to achieve in your life and what kind of person do you want to be?" If you get a moment, take 15-20 minutes and just write freely, without regard to grammar or spelling. Be concrete: who would you spend more time with?
Hey, I'm Douglas. I'm the founder of School of Financial Freedom. This is my story of how I reached financial freedom at age 42.