Nearly everyone I know wants to become financially independent, to retire early. But most folks have no idea how to do so. The method I describe in this article is simple to understand, although it might be tough to implement. I call it the “Money Boss method”.<\/p>\n
With the Money Boss method, you manage your personal accounts as if you were managing a business<\/b><\/a>. Doing so allows you to maximize profit and pursue Financial Independence \u2013 or any other any other money goal you choose.<\/p>\n For more on this concept, check out the Get Rich Slowly course, which teaches you how to become the CFO of your own life.<\/p><\/blockquote>\n Financial Independence occurs when you\u2019ve saved enough to support your current spending habits for the rest of your life without the need to earn more money<\/a>.<\/strong> You might choose to work for other reasons \u2013 such as passion or purpose \u2013 but you no longer need<\/i> a job to fund your lifestyle.<\/p>\n To achieve Financial Independence \u2013 or achieve other money goals \u2013 heed the basic rule of personal finance: To build wealth, you must spend less than you earn<\/a>. Forget the standard advice to save 10% or 20% of your income. To be a money boss, practice extreme saving. Your goal should be to save half of everything you earn.<\/b> (And more is better.)<\/p>\n Sound impossible? It\u2019s not. Most of the advice here at Get Rich Slowly 3.0 is built around helping you save half. To do so, you\u2019ll need to conduct a three-pronged attack.<\/p>\n First, minimize spending. Because a handful of expenses consume most of your budget, pursue these first (and with greatest vigor).<\/p>\n With the Money Boss method, these won\u2019t seem like sacrifices. They\u2019ll be trade-offs made to pursue a more important purpose. Plus, with mindful spending you\u2019ll still have the freedom to spend on the things that matter most to you.<\/p>\n Next, maximize your income. It’s great to cut expenses and develop thrifty habits, but there’s only so much fat you can trim from your budget. In theory, there’s no limit to how much you can earn.<\/p>\n Depending on your preferences and priorities, your path to Financial Independence might emphasize frugality. Popular blogs like Mr. Money Mustache<\/a> and Early Retirement Extreme<\/a> tend to promote the power of thrift. Other people prefer a road to wealth<\/a> that emphasizes income. For them, sites like I Will Teach You to Be Rich<\/a> can prove valuable.<\/p>\n Me? I think it’s best to do both. You’ll have the best results if you reduce spending and<\/i> increase earnings.<\/b> Your goal should be to create a wide gap between the two.<\/p>\n Aim to save half your income.<\/p>\n Finally, funnel your profit into smart investments. (“Profit” is the same as “savings” — we prefer to talk about profit with the Money Boss method.) Take advantage of employer- and government-sponsored retirement plans first. Then route profit to regular investment accounts. Don’t get fancy. Invest in low-cost, diversified mutual funds. Ideally, choose a total-market index fund, such as Vanguard\u2019s VTSMX. Ignore the news. Ignore market fluctuations. Ignore everybody. Keep investing during good times and bad.<\/p>\n If you can follow the three steps, you will<\/em> become rich — and sooner than you think.<\/p>\n With your profit, you\u2019ll create a wealth snowball<\/a>. Track its growth. Conduct an annual review. How much did you spend during the previous year? What are your investments worth? Have you achieved Financial Independence yet? To determine whether you can retire, use the following assumptions:<\/p>\n Based on these assumptions, there’s a quick way to check whether your goal is within reach. Multiply your current annual expenses by 25. If the result is less than your savings, you’ve achieved Financial Independence.<\/b> If the product is greater than your savings, you still have work to do. (If you’re conservative and\/or have low risk tolerance, multiply your annual expenses by 30. If you\u2019re aggressive and\/or willing to take on greater risk, multiply by 20.)<\/p>\n If you save half of what you earn, you should achieve Financial Independence in about fifteen years. If you save 70%, it\u2019ll take nine years. But if you only save 20%, you\u2019ll need to work for thirty years before you can retire \u2013 and at 10%, you\u2019ll need to work for forty-five years.<\/p>\n As I mentioned at the beginning, these principles also apply to pursuing other goals. Maybe you don’t want to retire early. Maybe you want to save to buy a home. Or to send your kids to college. Or maybe you want to quit your job and start your own business.<\/p>\n The Money Boss method applies to these situations too.<\/p>\n If you can save half your income, you can build the life you’ve always wanted.<\/strong><\/p>\n There’s more to it, of course — but not much more. The math and mechanics of Financial Independence are simple. They’re easy to understand. The hard part comes in mastering the mindset. It’s the psychology and emotions that hold people back.<\/p>\n My goal at Get Rich Slowly is to help you develop that mindset. If you’ve read this article and think, “Man, saving half my income is impossible!” then Get Rich Slowly is the place for you. In the weeks and months ahead (and in the GRS archives<\/a>), you’ll find tons of info about how to cut costs, increase income, and pursue your financial goals.<\/p>\n Stick around. Let’s build some wealth!<\/p>\n<\/span>Spend Less<\/span><\/h2>\n
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<\/span>Earn More<\/span><\/h2>\n
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<\/span>Invest Wisely<\/span><\/h2>\n
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<\/span>Enjoy Life<\/span><\/h2>\n