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Recently I outlined the 10 second calculation to understand how much you need to retire. Basically, we need to save 25x our annual expenses.
That’s a great rule of thumb. But if you’re like me, you still had a bunch of questions like “how long will it take me to save that much?” and “how much of my income should I be saving?”.
I hear you! In this post we walk through the Ordinary Dollar Early Retirement calculator — a simple to use (but very powerful) tool that helps calculate different retirement scenarios.
Once we’re done you’ll have a much more detailed understanding of how much you need for retirement, how long it will take you to get there, and how much money you can spend once you’ve retired.
Congratulations! You’re about to take a big step towards early retirement.
Last month I shared my net worth to the public for the first time. I was pretty nervous — but I didn’t need to be!
So now I’m back for more, here is my August net worth report.
This month’s focus was to get back on track after spending lots and lots of money on my Europe trip in July. I’m proud to say that I was able to contain my spending, whilst finding a really fun (but still reasonably cheap) new hobby.
In fact, I’m starting to think that the secret to early retirement might just be persistence, being mindful about your spending, and appreciating the little things.
Read on to find out more…
In my first post, I told a story about the Partners in my consulting firm. These people earned lots of money, yet they still worked well into old age. This wasn’t because they enjoyed the work, it was because their spending habits prevented them from retiring.
The majority of people live their lives like this. They believe that life is about working hard and earning as much money as possible. But because you’re working so hard, you deserve to treat yourself. Why shouldn’t you buy the nicest house on the block, the flashiest new car, or regularly eat at nice restaurants?
According to this common perspective, the role of work is earn money, and the role of money is to buy things that make you happy.
I’ll admit, even I held that view for quite a few years. It felt right to treat myself to nice things as a reward for working 80 hour weeks in a claustrophobic office. But I realised that, despite buying things I thought would make me happy, I wasn’t any happier.
Slowly but surely, I changed my perspective on the role that money plays in my life. I realised that money was a tool that I could use to unlock things that were important to me. That is, time to spend with people I care about and the freedom to focus on what fulfils me.
After this realisation, I had a bunch of questions: How do I manage money differently in order to unlock those important things? Will I ever be able to retire early? What sacrifices will I need to make? Am I being crazy?
And I’m sure you have similar questions, so let’s take a look at the very simple mathematics behind early retirement.
In my very first article I told a story about partners at my consulting firm that worked well into old age. They earned lots of money but didn’t seem that happy.
These partners worked long hours to climb the corporate ladder. And they spend their high incomes on big houses, nice cars, and fancy restaurants.
I had a hunch that this wasn’t the correct path to a happy and fulfilling life. But I didn’t have any proof. So I dived head first into the scientific research on happiness to figure out how we should spend our money.
What I found amazed me in it’s simplicity. All the happiness research pointed to one thing: we should spend our money on building close and loving relationships.
And I realised that being mindful with how we spend money allows us to build those close relationships and, at the same time, helps us reach early retirement faster.
I’ve always claimed that I started Ordinary Dollar to build a blueprint to early retirement and show that anybody (even an ordinary person) can achieve it.
An important part of this blueprint is being transparent about my own finances. And now it’s time to put my money where my mouth (or my typing fingers) are. Honestly, I’ve been hesitant to hit publish on this blog post — but here goes!
In this post you will find an outline of my income sources, a breakdown of my expenses, and a snapshot of my total wealth.
Unfortunately, not all goes to plan. This month I spent more than I saved. Not exactly great for a blogger than claims he can help people reach early retirement!
Actually, there’s a good reason why I spent so much money this month. And it turned out to be a very interesting lesson: although I spent more than I earned, my net worth still grew in July. What!?
Want to learn how I grew my wealth despite saving nothing this month? Read on…
Most people would say that life has a blueprint. You study hard at school, get a good job, buy an expensive house, and then work hard to pay it off. Along the way, you get to indulge in life’s luxuries because — well — you’re working hard!
I must admit that for the first decade of adulthood, I subscribed to the same blueprint. I studied hard and graduated with a competitive role at a multinational consulting firm. For a few years I worked long hours and paid my dues; hoping to eventually make Partner and earn enough money to retire.
But in the process I noticed something interesting: as my salary increased, I spent more. And as I looked at the Partners at my firm who were earning great money, they were still working well into old age. Why were so many seemingly wealthy people working for so long? Were they happy?