As I covered in a previous post, you can retire practically a millionaire by being debt free and saving your money for only 25 years. Retirement is typically at 65 so what should you be doing for the first 40 years of your life?
0 - 5: Be a kid obviously
6 - 15: Start developing hobbies and career aspirations
16 - 20: Get a job, work your way into some sort of management position
18 - 22: Figure out what you want to do for at least 10 years, go into debt for an education to qualify for that career path
20 - 25: Get started in your career and buy a house that you plan to keep until it’s paid off
25 - 40: Pay off your house and every other debt you have. Learn to live on what you make.
Stop creating new debt. Save for nice things you want.
And now it’s time to focus on retirement:
40 - 65: Change careers if you want. Save for retirement. $2000 a month at 4% interest will net you $1 million in 25 years. You don’t even have to invest in the stock market to be a millionaire.
If you absolutely must move keep your financial situation the same or make it better. Always keep track of what it will take to be debt free by the time you’re 40 and stick to that goal. If you can afford and want to pay for a larger house or a better neighborhood and still make the goal then great.
Regardless of your debt situation you should always be making enough money to pay it all off by your 40th birthday. If you’re not, then you’re cutting into your retirement.
The mistake many people make is saving for retirement their whole life and then getting there with a lot of debt. Suddenly retirement isn’t retirement because the meager amount you were saving your whole life is not sufficient to get you out of debt or even cover your debts for the next 20 years.
Look at it this way: you can put away $200 a month for 45 years at 4% interest and retire with $302,000 or you can get yourself out of debt and retire a millionaire by saving for 25 years after getting into and out of debt the prior 20.
