Sunday, 10 March 2019
5 Things to do NOW to Retire By 40
This is a question that's been on my mind for the last decade.
Since 2009, I've been working like madman to try and make this dream become a reality.
As I've discussed at length in past posts, I arrived late on the investing scene and only began to show interest in the stock market in 2015.
Read about my story here and here and here and here and here
Since then I've injected almost a million Singaporean dollars into a dividend paying portfolio, which payed me just under $40,000 in 2018.
Read about this here and here.
Also, I've built a 5 story building (office space and 10 apartments) and bought three houses. My property portfolio generates a decent amount of passive income per month as well.
Presently, I pay a mortgage on the 5 story building and one of the houses, and my plan for 2019 is to wipe out a proportion of this.
Combined, my passive income is hefty chunk per year, but how did I do this?
You need time for one thing.
If you are doing business and making money, ten years should be almost enough to reach the retirement finishing line. Of course, this depends on your situation, but it should apply in most cases.
Once you have cash, invest aggressively in both the stock market and property and let the power of compounding take over.
Anyway, without waffling on for too much longer here are my 5 things to do NOW to retire by 40:
1. Earn and save like a demon
You need to save a large chuck of your wages if you are an employee and the same goes if you own our own business.
I recommend the latter of these if you want to retire by 40.
Owning your own business gives you the potential to earn a ton more cash which you can use to generate passive income.
This is what I did and it has worked out nicely.
That said, you need to be super focused and sacrifice many things.
Being your own boss requires you to be disciplined and fearless.
If you can, the financial rewards will come.
So, start generating income streams as young as possible and save, save, save.
2. Determine the purpose of your passive income
Set yourself goals for what your passive income is going to pay for in a given month.
Perhaps you start out by setting the goal that your passive income will be enough to cover your food bills for each month. Then, once you have accomplished this, it could be your car expenditure.
Build things up brick by brick and before you know it, you'll be on the way to retiring by 40.
I set myself the goal of paying for the mortgage of my 5 story building with passive income.
I have now achieved this.
3. Be accountable
Make sure you save X amount of money and then invest it in Y. Be clear with what you want to achieve.
I write down my goals and stick them on my fridge.
This reminds me every morning of what needs to be done.
Visual reminders are powerful ways to motivate.
Every time my stock portfolio generates $5,000 in passive income I reinvest.
4. Don't take money out
Many people nibble away at their stock portfolios, selling counters to pay for XYZ.
Avoid this type of action.
If you want to retire my 40 you need to let the power of compounding take effect over time. Thus, selling stocks weakens your position.
Of course, there are situations when selling a stock is necessary, but just don't make it a habit.
5. Determine which type of passive income is for you
Let's get one thing straight. You are not going to be able to retire by 40 if you don't take any risk.
The higher the risk, the higher the return.
This is not to say you dump all your cash into penny stocks. Far from it.
At the moment, my stock portfolio is about 60% in REITs and about 40'% in dividend paying blue chips.
This is risky I admit. But, that said, I'm in the game for the long run and don't plan on selling when the going gets tough.
In fact, I will continue to reinvest my dividends no matter what happens in the market.
For me property, blue chip stocks and REITs are how I generate my passive income.
Passive income allows you to do the following:
5. Spend time with friends and family
7. Live longer
8. Drink until 2am on a Monday
9. Look and feel better
10. Listen to podcasts
So, the above are my 5 things to do to retire by 40.
I hope you have enjoyed reading this post and I wish you all the best.
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