The financial world we live in is just as wild, if not more, than the mountains and woods we walk through. We are told that the fundamentals of our economy are strong, but we can feel that something is wrong. My unique financial background and survival passion make Financial Survivalist and excellent place to learn and share.

Monday, January 2, 2012

What is Retirement to You?

Because of relatively recent financial events, there are an incredible amount of middle aged Americans who are no longer sure when or if they will be able to retire. I fear that by the time I reach "retirement age" retirement as we know it may no longer be a likelihood.

Our financial world is changing rapidly and doing so in stealth. Most people don't realize the significance of the current financial events or their long term concequences. Financial rules are being rewritten, and my children will learn a difference set of rules than I.

Luckily my definition of retirement is different than most people's. For most people retirement means you work until you have enough money to do what you really want to do. However, my definition of retirement is financial independence; when your passive income surpasses all your living expenses. This means your financial situation is such that you don't have to work if you don't want to.

Do What you Love

The first and most important step of a smart retirement strategy is never planning to retire. "If you do what you love you will never work a day in your life." I don't think that's true, because even if you love it you often must work very hard in order to be successful. However, the point is that if you are happy and enjoy what you are doing, then in a worse case scenario, it won't be so tragic if you cannot retire.

One of the sadest retirement strategies is working a job you hate hoping that one day you won't have to, and THEN you can enjoy life. Life is too short to spend it doing something you hate. I'd rather be poor and happy than rich and miserable.

Earn Passive Income

The whole goal of retirement is reaching a financial point in which your passive income surpasses your living expenses allowing you to no longer work. Most strategies are saving as much as you can until you have enough money to live off the interest. This strategy seldom works the way people hope, and even when it does it takes most of a person's life to save enough money.

This strategy is also designed around the financial industry. Most people in the financial industry are not paid by how well they invest money, in fact almost no one is. Most financial professionals are paid based on "assets under management," that is the ammount of money you have invested. They get a percentage of this amount every year no matter how much money they make or lose for you. It is in their best interest to convince you to invest all the money you can, and even when you are retired to keep it invested.

My strategy is to create passive income through cash flow. It doesn't matter if my net worth is $10 million or $0; if my passive income is more than my living expenses I have reached that "retirement goal." I have become financially independant.

My preferred way of creating passive income is real estate. Real estate is unique in that it uses other people's money to create passive income. There are plenty of hoops to jump through, and it is difficult to make it happen, but if you are successful it is worth it. Real estate also has many other financial advantages including tax advantages and inflation protection. My goal is to do this by the end of 2012, and significantly pass it by my 30th birthday (two years).

Invest in Yourself

"When it comes to economics, the majority is wrong 99% of the time." Rather than buy into the hype and follow the croud into a failing system, educate yourself. It is well worth it to take the time to financially educate yourself. Make yourself a better steward of your finances than some guy with a fancy title and an expensive conflict of interest. There are numerous places to put your money other than an IRA. Read Alternatives To Traditional Retirement Accounts. Be Smart and Thrive.

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