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How to spend no more than 30% of income: the advice of a retired millionaire at 35

In 2016, with nearly $ 1 million in savings, Steve Adcock quit his software development job and retired at age 35. A few months later, his wife Courtney joined him. Writes about it CNBC.

Photo: Shutterstock

Not everyone will be able to retire at age 30, but many can achieve financial independence. It may not be easy, but you do not need to be a genius to do this.

Nobody wants to be bankrupt, so even if the goal is not to retire earlier, we all have to live by these six basic principles to create wealth.

1. Make financial freedom your # 1 goal

The first rule is the most important, and it has little to do with money. It is about a sufficient desire to achieve a goal to make it your top priority.

“I had a great salary and I was doing my job well. But I was afraid to go to work every day. I didn't like having a boss or sitting on performance reviews. Meetings, work conflicts and long commutes to work were exhausting. So I decided to make early retirement my primary goal, ”writes Adcock.

“I focused on making dramatic changes to my financial habits. Instead of letting my money sit idle, I invested more. I also started saving 70% of my income. It was difficult at first, but it got easier as I kept reminding myself that everything I was spending on were things I either didn't use or didn't need, ”Adcock adds. “None of the changes I made were sacrificed because I knew they were all for my goal. It's like getting in shape: you will only lose or gain weight if you change your diet and habits. And you have to want it badly enough to keep doing it. "

2. Actively increase your income

“Even though I was making six figures, I was always thinking about how I can use my skills to actively increase my income,” Adcock writes.

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He launched a financial site and constantly wrote on it. In the end, he began to earn an average of $ 1000 per month on the site. Together with his wife, they also launched a YouTube channel on which they documented their travels, which brought in another $ 400- $ 500 per month. And, leaving a little free time, he earned several hundred dollars on part-time jobs.

“But I still worked hard in my day job because it was my main source of income. I wanted to show my boss why I deserved a 10% or 15% promotion (which I asked for and received - twice). Halfway through my career, I got up the courage to ask for a promotion. Four months later I was promoted, ”writes Adcock.

Courtney also earned a lot. Since they both saved 70% of total income, which ranged from $ 200 to $ 000 a year, they quickly approached early retirement.

3. Invest in valuable assets

Saving money, raising rates and hustle and bustle will not help you retire faster. Adcock and his wife created the bulk of the budget by investing in valuable assets such as the stock market, real estate, businesses and relics or historical objects.

The idea behind this is simple. You buy an asset at a specific price. Over time, an asset grows (or increases) in value. And boom, now you have something that costs more than you paid.

If you invest $ 1000 and you get 10% (or $ 100) a year, then your new base starting point next year will be $ 1100. Another 10% of profit is $ 110. Add to that a couple of zeros, and there will be enough money to retire.

“In the following years, thanks to investments in valuable assets, we have increased our savings to over $ 1 million. When it comes to investment, late is always better than never. If you haven't started yet, there are many resources on the internet, or you can talk to a financial advisor, ”Adcock writes.

4. Automate, automate, automate

I always like the approach of non-interference when possible, especially when it comes to money.

Many employers offer retirement plans, and most companies will automatically make contributions directly from your salary to your investment accounts. Once you configure it, you no longer have to worry about it.

Adcock and his wife took full advantage of this when they worked.

“Automation will make your life so much easier because you don't have to rely on discipline when paying bills, avoid late fees, accrued interest or downgraded credit ratings,” Adcock writes.

5. Know where your money is going

One of the most effective ways to eliminate debt is knowing exactly where your money is going. Every penny counts. It's a basic principle, but many people lack the discipline to sit once a month and review their spending.

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A few simple steps can make a huge difference in your finances:

  • Look at your accounts instead of putting them aside. Make sure you understand every position in your account.
  • “Fun” expenses should be after paying bills and replenishing pension accounts.
  • Don't ignore small expenses. They can tell you a lot about how spending habits are working against you. For example, morning coffee, lunches and much more - all this adds up to decent amounts.
  • Monthly subscriptions are notoriously forgotten. Make sure you know how much they cost and whether you actually use them or not.
6. Separate yourself from things you don't need.

“I had a Corvette Convertible and a Cadillac CTS. I also rode a Yamaha R1 sports bike around the city, paid $ 150 per month for insurance. But I sold all these things after I made early retirement my main goal. ”

“Courtney and I now live very modestly, we cannot be happier. We've cut down on cable TV costs and are using streaming subscriptions at half price. We only spend $ 50 a month on food in restaurants. We buy new clothes less than twice a year. We buy phones only if the old ones are completely broken, ”writes Adcock. - You don't need to give up everything, you need to reassess your priorities. I believe in spending money freely on things that bring you lasting joy and cutting back on things you don't need. The key is to recognize what makes you happy and what doesn't. "

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