With $1 million in savings in 2016, Steve Adcock quit a great software development job at 35 with wife Courtney joined in early retirement. Retiring early is difficult, but financial freedom though never easy, is achievable, without requiring genius financial skills. To save even if the goal isn’t early retirement, six basic principles can accumulate wealth:
Financial freedom the main goal
The first rule is about achieving a goal, making it your top priority. The daily 9-to-5 life was too exhausting and they desired to travel the world. So, early retirement became the primary goal with dramatic changes in financial habits. Instead of money lying idle, both saved 70% of income and invested funds. It was difficult, but became easier by saving on frivolous expenditure. If you desire it, you stick to it.
Boost your income
Boost income using skills when not in the office. Steve started financial site writing consistently on it earning $1,000 monthly through the site. The couple started a YouTube channel documenting their travels, securing $400 to $500 per month with Steve earning a few hundred bucks by freelance writing. Steve’s day job was the primary source of income. Both earned several raises but saved 70% of their combined income, ranging from $200,000 to $230,000 a year, to afford early retirement.
Always automate
A hands-off approach to money is preferred. Many employers offer retirement plans, debiting your salary automatically directly into your investment accounts. Once set up, never worry about it. While working, we contributed automatically to our 401(k) and IRA accounts and transferred money from checking into savings and paid all credit card bills automatically. Automation makes your life much easier, as we lack discipline to pay bills and avoid late fees, interest charges which reduce credit scores.
Know the value of money
Eliminate debt effectively. This basic principle is ignored as people lack the discipline to review their monthly expenditure.Simple actions make a huge difference to finances: Review all bills rather than throwing them aside. Never ignore small expenses as these reveal which spending habits work against you. Morning coffees, expensive lunches, all add up. Monthly subscriptions are always forgotten. Be aware of hidden costs and whether actually necessary.
Invest in appreciating assets
Saving income, getting raises and carrying out side hustles, cannot enable faster retirements as wealth creation is about investing in appreciating assets: the stock market, real estate, businesses and relics / historic objects. You buy an asset and over some time, your assets appreciate in value and your asset is worth more. With the power of compound interest, assets appreciate not linearly but build exponentially. Over the years, by investing in appreciating assets, savings exceeded $1 million. If a newcomer, study resources online or consult a financial advisor.
Detach from things not needed
Steve had a Corvette Convertible and a Cadillac CTS besides riding a Yamaha R1 sport bike, and paid massive insurance premia. All disappeared post-retirement, with the happy couple live a frugal life without cable TV, but with a cheap streaming subscription, spending only $50 per month at restaurants. New clothes are rarely purchased while phones are upgraded only if unrepairable. Cutting back on expenses means re-evaluating priorities. Spend liberally on things ensuring lasting joy, while cutting expenses on inessentials.
