I got an interesting question from a 25 Year Old the other day and I thought I would post the topic here to see what others thought of my advice and what I got right /wrong.
My first thought after hearing the question - it is absolutely possible and in fact likely assuming a few things happen over the next 10 years.
1) You must focus on keeping your expenses low. Where Baby Boomers and Gen X generations went wrong is we bought houses, cars and had kids in our 20's which meant we increased our expenses by a lot making financial freedom much harder and thus we had to stay in the Rat Race longer. If you can keep your expenses the same or nearly the same at 35 as they are at 25 you have taken a huge step towards financial freedom.
2) You must take action, learn your market and secure solid positive cash flow rentals or other side hustle, that are conservatively financed and allow for easy long term hold through any market cycle.
Frankly I think Millennials have a great chance at producing a record number of 35 Years that retire Financially Free as they are making life choices that for now keep expenses very low and thus allow them to get to financially freedom quicker than other generations.
To be this different...one has to be different. Buying a house isn't the problem. It's the fancy house with the fancy car payment and not wanting to be inconvenienced by having a rental or roommates with it at first.
I did it at 31, but nobody was asking me for advice as I drove my beater with my brown-bagged lunch living in a trailer park.
Most won't work and sacrifice enough, not to mention bother to get their phone out of their face long enough to even meet people or do critical thinking of their own.
I think the mindset matters more than anything else. Regardless of whether it actually ends up happening at 35 or not depends on a ton of variables, but if the right mindset is taken, they are going to be on the best path possible towards financial freedom!
Where Baby Boomers and Gen X generations went wrong is we bought houses,
This part of your thesis is wrong. The vast majority of people will never be able to earn and save as much as if they simply purchased their own home and held onto it. The average net worth of a homeowner is 36 times greater than the average net worth of a renter.
@Michael Zuber I don't see where you may have mentioned earn as high of an income as you can, The formula isn't to just spend as little disposable income as you can, As a Generation X kid, we were taught earn as much as you can and spend as little as possible. My best friend a former NYC Wall Street banker retired at 42 last year, another Gen X-er who lived by this philosophy, Getting to "financial freedom" happens a lot faster when you make significantly more money.
It also depends on what part of the US you live in, Some parts of the US, getting a Six-figure job is the standard, and other parts of the US, there are very few if any jobs where 100K and up is the norm. I just hired a 25 years old at $85k a year, as a Millennial she's now shopping for a home in her 20's, this isn't a bad idea or going in the wrong direction in my opinion, she understands the value of a high income in the equation in addition to low expenses. It isn't the house and kids that slowed down the Generation X-ers, it's the spending habits found in every generation, even the millennials, I see Millennials making terrible financial decisions daily, and the generation after them will do the same.
@Michael Zuber get them connected with the financial independence community, such as Mr. Money Mustache blog. There is lots of good advice there for limiting spending and early retirement. They focus mostly on reducing expense. I don't think buying a house or having kids is necessarily the problem. It is the big house and fancy car that is more the problem.
The other side of the equation is income. A good paying job or starting your own business (rental or otherwise) goes a long way in setting a person up for early retirement.
Wrap it all together, if you can control spending, increase earning and invest the difference, retiring by 35 is very possible. Millennials are already falling into the same consumerism traps that previous generations fell into.
@Michael Zuber One thing more millennials probably have than Gen X and baby boomers is school debt, which is why they aren't buying houses/cars. Generally your advice is sound, spend less and make more. I think the underlying question is how does someone realistically achieve that based on their current situation. That's there harder question to answer that requires more information about the person. Until there is an actual plan of action, the advice is more inspirational than anything.
@Michael Zuber I don't see where you may have mentioned earn as high of an income as you can, The formula isn't to just spend as little disposable income as you can, As a Generation X kid, we were taught earn as much as you can and spend as little as possible. My best friend a former NYC Wall Street banker retired at 42 last year, another Gen X-er who lived by this philosophy, Getting to "financial freedom" happens a lot faster when you make significantly more money.
It also depends on what part of the US you live in, Some parts of the US, getting a Six-figure job is the standard, and other parts of the US, there are very few if any jobs where 100K and up is the norm. I just hired a 25 years old at $85k a year, as a Millennial she's now shopping for a home in her 20's, this isn't a bad idea or going in the wrong direction in my opinion, she understands the value of a high income in the equation in addition to low expenses. It isn't the house and kids that slowed down the Generation X-ers, it's the spending habits found in every generation, even the millennials, I see Millennials making terrible financial decisions daily, and the generation after them will do the same.
Critical piece right here by Ray. One must have a high earned income. The first and most important thing is to increase your income so you can actually save some real money. Gotta create high-income skills for yourself. Now that you have done that you can save and invest.
To be this different...one has to be different. Buying a house isn't the problem. It's the fancy house with the fancy car payment and not wanting to be inconvenienced by having a rental or roommates with it at first.
I did it at 31, but nobody was asking me for advice as I drove my beater with my brown-bagged lunch living in a trailer park.
Most won't work and sacrifice enough, not to mention bother to get their phone out of their face long enough to even meet people or do critical thinking of their own.
Being a millennial myself I can attest to student loan debt holding you back. It's difficult for anyone making the recommended payment, bills, and rent to get ahead. I also made the mistake of buying a BMW after college.
When I turned 30 something clicked and I was fed up. Indianapolis was slowing kicking my ***.
I sold my motorcycle to pay off the car. I starting cooking all my meals and stopped eating out. I challenged myself to read a few books. I developed a plan to purchase properties I can easily afford. The MINDSET is everything but took me 4 years to figure it out.
@Michael Zuber I think any 25 year old can absolutely be financially free by 35 but it obviously depends on a ton of factors. As a young adult or student we are forced to live like one by living on a budget(barring a ton of help from mommy and daddy or irresponsible student loan borrowing). It’s not that complicated to limit the amount of lifestyle creep on your expenses as you grow older, just so few have a strong why that keeps them disciplined to. Although I’m not suggesting your friend should go obsess clipping coupons; living relatively inexpensively while finding ways to maximize income whether it be through additional schooling, working a job with growth potential or building a business. One thing that’s helped me is creating spreadsheets to set goals on savings and approximate returns and running different scenarios on how I can get to my goal of financial freedom. With student loan debt, a median salary, and below average effort, you can’t expect vast riches in 10 years. But with some additional effort to increase income, limit expenses, and maximize returns ideally through safely leveraged, value add cash flow real estate investing; I believe someone with reasonable expectations of what it would take to cover a modest 35 year olds bills of say 5-10k a month to allow them to stop working full time can absolutely accomplish that in 10 years.
I believe any 25 year old could be financially secure by 35. The chances of it actually happening however is extremely rare. Consider the statistic that 95% of those wanting to invest in real estate actually fail. Same stats likely apply to every form of wealth generation.
Most people simply do not have what it takes to succeed.
@Thomas S. I think you're onto something here. If you take an overly simplistic view, the reality is that virtually anyone CAN do it, but almost everyone will not, statistically speaking. It really just comes down to a mindset matter like several touched on earlier in this thread. Will you be part of the few that have what the few have, or will you be part of the everyone else that has what everyone has? With the endless amount of information available on sources like BP, there is really no reason that someone cannot make it happen. It's just a matter of choosing to do it.
@Michael Zuber I am 27 with my goal set on my first million by 32 after that the flood gates are open and the race has begun! . Although the race has sort of begun already that would be the final race.
Anyone can achieve it but its about the right road you are going to take and persistence. And where you are investing your money. Are you getting alternate ways of producing a dollar?.
* What is your game plan and do you want it bad enough ?
*set your money goal and be exact on the date you will it by.
* do your homework and work hard on your knowledge for your niche.
*Dont be afraid to risk it for that biscuit!!
I guess at the end of it all the answer is yes you can do it. And I have learned this far in life if you are asking that question? Can you be financially free at 35 if I am 25 then you will not make it because you have already stored doubt in your self. Be confident and the only question you need to be asking your self is where do I invest the next dollar.
Financially free means very different things to different people. I'm 25. We have 47 units and growing. That being said I also have other income streams that allow me to focus on building our portfolio vs. needing to suck every dollar out.
I will probably be able to "retire" before 30 but why would I? I do think in my 30's I'll have a phase of "what do I want to do now".
That being said I'm learning more all the time and focusing on bigger/better deals.
The #1 thing I see between people who are successful in my generation and those who aren't is... Confidence.
I know guys who are in Forex, Digital Marketing, Agency, Rei, Etc who are all easily in the top 1% and a lot of them travel full time.
I think what really interests folks my age is "the new rich" as Tim Ferris puts it. Time Freedom. The ability to come/go on a global level.
Which is why I'm such a fan of building out systems/processes that allow me to run my companies from anywhere in the world.
@Michael Zuber It is possible for anyone at any age in less than three years to receive complete financial freedom depending on how bad they want it. This is entirely circumstantial but very possible. In Scott Trenches book Set for Life, there is a pretty good start explaining that you don't need a budget and you don't need spreadsheets because it's scarce that you stick to them anyway. You don't need to cut down on your spending you need to focus on the big things that you are spending the majority of your money on, such as your house and your car and the gas for the car. In theory, you don't even need to focus on your daytime job you could be making min. Wage. So here is a simple timeline and example on how this person could do it in 10 years which is a pretty long time if you want it bad enough. But you have to want it bad enough. This is through Real Estate of course. This a single person is living in an Apt. Making min. Wage.
Year one: Realize that you want to be financially free. Read every book you can get your hands on about living financially free. Rich dad Poor dad, Set for Life, Four hour work Week, the Richest man in Babylon. Now you have the mindset focus on Real Estate Books: Beginners Guide to Real Estate Investing, All the J. Scott books research on Bigger pockets every day.
Year two: Start networking on this site at local REI meet-ups. If there's not one make one people will show up. Start talking to your family about it. Chances are they know someone who did or doing what you want to do. We're going to start with flipping so we can have money sooner than later to begin our rental portfolio. Now by the end of this year, you should know at the very least two or three people in the industry that are successful. Tag along on one of their projects to learn the processes. Now you're ready for your first deal. Get on the MLS, drive for dollars and talk to people. These options are both free, so up until this point, we haven't spent any money.
Year Three: At some point in this year if you haven't given up you will have found a deal. (but we don't have any money) Well lucky for you, you have been networking for a whole year, and you know people who know Real Estate. With the combination of Hard Money and using your network to put up the money, you need for your down payment you're ready for your first flip. Now that it's complete you have a little bit of money anywhere from 10-20k depending on your area and how much profits you paid back to your lenders. Now do it again, but this time it's easier because you have less money to raise and you have done it before. Now that two flips in one-year that's not an outrageous goal.
Year Four: flip At least 5-6 houses. You should be good at numbers and financing at this point so you should have at least 100K saved at this point because your making 20K off each flip. Now you have two options at this point you can either start buying rentals or expand your flipping business. Let's say we put 40K down on a duplex that's generating $300 per side in cash flow a month. We only put 40K down so we can still have money for our flips. You're still working your minimum wage job, so all of your bills are still being taken care of so you can save all of your profits.
Year five: Flip lets say ten houses which still isn't a lot. Now you have 200k saved up. You now have enough to put a down payment on a million dollar apartment complex, or you could put together a syndication deal and have an asset worth anywhere from 5 to 10 million dollars. You get that together and your making at least 5000K a month in cash flow plus the 600$ from the duplex. And we're done in five years with only 17-18 deals. But why would anywhere stop there?
That didn't even take ten years, and you could move at a slower pace. The thing is anyone can do this regardless of what their situation is. A dollar was not spent out of your pocket until you made money off your first flip. The problem is people usually think they want something, but they don't want to put the work into making it happen. You could even do it faster if you leveraged more had more partners and flipped more houses sooner. This example did nothing but learn and network for the first two years. Its simple it might not be easy, but it is simple. If you take active steps each and everysingle day then you will make progress and you will be there. I AM 25 YEARS OLD AND I WILL BE FREE IN LESS THAN 3 YEARS
@Michael Zuber. I think it’s doable but it takes ample savings and years (8-12 minimum) of diligent savings and investing to make it happen. Most people won’t do that
It is 100% possible to be financially free at 35 if you start at 25. I am 22 currently with the goal to be financially free by 25 for which I am on track to hit. Plan is to just keep living like I am on a college budget while making real money and investing every dollar I can into high return rental properties. By utilizing hard money and partners I am able to scale up to enough rentals to cover all of my living expenses fairly quickly. Its all about education paired with action.
I set out to reach financial freedom at the age of 25, so this topic hits home for me. I'm 26 now and 10 rentals under my belt. At my current rate, I will be financially free before 35, so yes it is possible. I do obsess about financial freedom and "retirement" so that is a game changer.
I believe it is possible for any 25 year old to become free by 35. Just depends on how bad you want it.
@Michael Zuber
I get this question A LOT. You are not too far off the mark. Keep it simple is a good strategy and offering the sage advice of “Live way below your means”, and make a ton of money is good advice for anyone regardless of age towards early retirement.
My only other input, besides if it is possible. Is to diversify. You want to build balance portfolio of passive income. Just not only real estate. You want to take advantage of cyclical markets.
And where are you going to get affordable healthcare. If he/she wants to retire early, that will be a huge factor besides cost of living where they should retire. 6 million in Seattle, going to be far less as compared to Chang Mai in Thailand.
