How can i become financially independent and retire in 5 years or less?

Discussion in 'Passive Income' started by admin, Nov 10, 2015.

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  1. admin

    admin Administrator Staff Member

    Admin Post
    Since a very early age I hated the concept of getting up and doing something I really don’t want to do and then going home. I really hated school which lasted from 8.45 am to 3.25pm, it got worse with work starting at 9am and finishing at 5.30pm (weep).

    I never really listened to what I wanted and played the script other people and society expected me to play (School, Work, Retire, Die!). I don’t think I’m really cut out for working especially for others; I love the freedom of working my own hours whether it is 10 hours a day or 2.

    I am 30 years now and I have come to a point where I want to do what I want, I don’t want to wake up and go to work and do something I really don’t enjoy! I mean life’s too short and wasting it doing something you hate will shorten it even more. Don’t get me wrong not everyone is the same, if you love your job and enjoy working then good for you!

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    Financial independence is what I’m looking, the thought of not waking up to the drudgery of work and instead doing something I enjoy like spending time with my family fills me with great joy and enjoyment; it is a very liberating and refreshing feeling and you should definitely try it, imagine it, dream it if you dare.

    So how does one become financially independent where you have a stream of passive income which comes in whether you do something or not? Well to me passive income is like renting your fully paid property out. If I had a 3 bedroom property which was fully paid and rented it out via an estate agent I could expect to get £1200 per month guaranteed. Now whether I work or not I would get this payment in my account every month.

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    The key to financial independence is generating these passive revenue streams and then living off the income and reinvesting the excess into generating more passive income. Let me explain, at the moment I write for revenue sharing sites, I am generating £350 per month my outgoings are £1200 per month, once I reach £1200 I can stop working and anything I make above £1200 can go to my savings account to generate more income. Therefore my target is £1200 per month at which point I can become financially independent!

    Financial independence does not necessarily mean you can retire! there are many variables that you need to consider. If I was to earn £1200 per month writing on revenue sharing websites then my outgoings are covered and I can live to my normal standard of living.

    But what if the revenue sharing websites decided to make changes and only share 40% as opposed to 75% of income I would be in great hardship! What I am trying to explain is that there are too many factors that are outside of my control and relying on passive income that you have little control over is dangerous! There is nothing worse than thinking you are financially independent and then having to go back to work a year later!

    Ok so what is the solution? How can I become financially independent and retire as soon as possible and how long will it take? To answer these questions I will use myself as a case study but I guess the idea or ideology could be extended to everyone. I am 30 as you know and am married with a 2 year old. I earn £1595 per month and have outgoings of £1200 per month.

    My first step towards financial independence is trying to maintain my quality of life for less! £1200 is a lot of money in my opinion. Most of the outgoings is mortgage (£500) Taxes (200) Car (100) Food and clothes (£300) Energy (£100). I know that if I can reduce this outgoing then I can reach financial independence quicker. I am in the process of trying to reduce this to £800 without compromising my quality of life which I will detail on another post.

    So let’s imagine that six months down the line I have managed to cut my expenses to £800 then this is the figure I need to reach to support my expenses, I will definitely reach £800 quicker than £1200 and it also means that when I reach £1200 I can save £400. I won’t leave my job when reach £800 because as I said earlier it’s too risky.

    To become financially independent and retire without worrying I need to generate £800 per month from passive income streams which are 100% dependent. Personally for me something like a high paying interest rate account would be a reliable source of passive income, another would be renting out a property that you own completely to generate guaranteed returns from an estate agent.

    So for me the key to financial independence and ultimately retirement is to find a reliable passive income stream and work out how much you need to achieve this!

    Ok so now that we have a plan or ideology we can start crunching the numbers which for me is the fun part! £800 per month equates to £9600 per year, the amount of money I would need to accumulate £9600 per year would be £240,000 ((£9600/4) x 100). Just shy of a quarter of a million pounds! There are a lot of factors to consider when working this figure out, for example if you can live on £500 per month and can find a prevailing interest rate of 5% then all you need is £120,000.

    So how on earth can you accumulate such a large amount of money? Let’s say I want to retire in 5 years then I need to accumulate £48000 per year or £4000 per month. If I can start to save $4000 month then in 5 years I can retire. A lot of people might look at this figure turn away thinking that it’s an unrealistic amount to save but before you do please read the following sentence. When I first started generating income from the internet I was making pittance; six months ago I made £30 per month; since then it has increased on average by 30% and I am on £350 per month! If I put more effort in then I really believe that I could increase this to a 50% increase which means I can generate £4000 per month by Christmas, this would continually increase if I continue with my endeavors and it may be possible that I could so it quicker than 5 years.

    Some people might read this post and think £4000 is only achievable by a few but I truly believe that studying keyword research and writing quality articles and blogs can help you achieve this. Passive income isn’t just for the internet, there are many other places to generate income, rent a room out, rent your car out, create and sell something on the internet or just simply save more money and let the interest compound and do its stuff, for me this is a challenge and I do whatever it takes to succeed.

    There is a part of me that wants to take this to insane limits, the part of me which craves financial independence and retirement so much it hurts. If by December I can reach £4000 per month with 50% increases monthly then within 4 years the average I could generate passively from writing would be £10,000; If I was also able to save around 50% of what I earn then I would be saving £797.50 per month, in total I would have on average £10797.50 which would mean that I could retire in 2 or 3 years.

    There are many other areas that I am also looking at to find safe ways to increase my savings rate. So far the stock market is a quick way to make money but for me it’s too risky. My searches have made me seriously consider options strategy as a safe way to increase your savings. With options investors can set risk returns, sometimes I have even found trades that have a 15 to 1 return and an investment as little as $100 can make $1500! For me it is all about how quickly I can educate myself and find ways to generate income safely, I clearly understand risk and always assess whether something is too good to be true.

    Ok so will this really work? I really don’t know! But I will find out whether it can be done. I will live by a few rules to help me achieve this namely:

    1. Don’t live beyond your means and save as much as you can, aim for 50%.
    2. Do not get into further debt and look for ways to pay off existing debt quickly.
    3. Generate as many passive income streams!
    4. Generate passive income from passive income by saving money in high interest bank account and reinvesting the interest or dividend.
    5. Look for ways to cut your expenditure without sacrificing quality of life.
    I will probably add to these rules or refine them every so often as everything changes, one thing that won’t change is my desire for financial freedom and retirement!

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