One of the most important and possibly THE most important factor in financial independence is Savings Rate. Essentially, this is the percentage of money you save relative to your income.
This may be the best book for someone in their twenties and possibly in their thirties to read. I have been reading a lot of books on early retirement, financial independence, and self-improvement lately and The Simple Path to Wealth by JL Collins might be the most informative and motivating.
Tony Robbins is not known as a financial master and he shouldn't be. He is a motivator and the self-help guru. That is his thing. With that in mind, I decided to read Money: Master the Game. Essentially, this book aggregates Tony's interviews with the world's smartest investors such as Dalio, Schwab, Bogle, and Buffet and then puts the information together to form a basic investment strategy for the mass population and provide a high level overview of investing.
During the summer, I am an eating machine. I indulge in brisket, pulled pork sandwiches, ribs, chicken tacos, burgers and anything else that I can cook on a grill. I enjoy craft beer and drink a few of those as well. I really just eat as much as I want and somehow I don't gain any weight. How is this possible?
Well as expected, this all depends on how much you plan on spending. As a frugal retiree you may need as little as $15,000. As a lavish spender, you may need over $100,000. Either way, there is a fairly simple way of calculating what you need saved up.
Numbers have a way of surprising you sometimes. Add a bit of time to them and they can blow your mind. Take for instance the Rule of 72. This is a formula to determine how long it takes for money to double depending on a certain interest rate.
I recently came up with a quick and easy way to increase my savings rate and put any new possible expenses under the radar. Now, I am sure this isn't an original idea, I haven't read anything about it. It is a very basic idea.
I have gone back and forth 1000 times. Some people are 100% certain, but I can't decide whether or not to invest my extra money or put it towards my house. My wife and I max out our IRAs every year and have been increasing our 401k contributions every raise/year. I will be close to maxing that out this year. So then what? Index funds? Mortage? FU Money?
Be aware of your finances, but don't spend your time on them. That is the route I decided to take. Just like with investing: KISS. Keep it simple stupid. 99.9% of my purchases are by card. Keeping track of cash purchases would take a bit of time and I don't want to spend my hours looking at/for my paper receipts. So I rely on technology.
In 1896, the Italian economist Vilfredo Pareto published a paper that refers to the Pareto Principle. A principle that states that 20% of causes produce 80% of the effects. He developed this principle by noticing that about 20% of the peapods in his garden contained 80% of the peas. That is a pretty basic observation that would soon turn into a very significant one.
'Wait a minute... I am only making 5 bucks an hour?', says the average American after reading Your Money or Your Life. I just worked 3 hours to pay for that sh*tty meal at Burger King?