- JP Livingston retired early at age 28 with a nest egg of $2 million.
- Her entire career before early retirement lasted seven years; she now runs the blog The Money Habit.
- During her career, she learned the ins and outs of planning for financial freedom.
- Below, she shares her best advice for making money — which includes creating a side hustle, honing your career-management skills, and reinvesting in yourself.
My parents grew up poor. Eight-people-living-in-a-one-room-apartment poor. Food-stamps poor. "You're a busboy, and maybe one day if you work really hard you'll move up to being a waiter" poor.
When I was a kid, my parents constantly emphasized how important financial freedom would be, and what one must be willing to do to achieve it. I eventually retired early, at 28, with a little over $2 million. My entire career totaled less than seven years before early retirement.
Here are six building blocks that helped me get to multimillionaire status quickly.
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Average habits lead to average outcomes — if you want an above-average net worth, you need to make above-average efforts.
The median retirement age in the US is 63. The median net worth of households age 65 to 69 is $193,000. Between that and the average Social Security, that means the average retired couple has to live on less than $2,000 a month.
If that doesn't sound appealing to you, then you'll have to do better than average.
While it sounds obvious, this is actually a game-changing thought. To retire early and enjoy atypical wealth, you will be employing strategies that most of your friends probably don't use. You will be investing your money differently. You will be living differently. And that's OK. It's to be expected.
Information is the key to riches.
While a certain amount of effort and discipline is required to amass wealth, the biggest distinguishing factor is knowing where to apply that effort. What we pursue is limited by our knowledge of what's out there. The difference between two people with the same circumstances but different knowledge of their opportunities can easily be a million dollars. A few examples:
- I discovered that graduating from college in three years instead of the usual four could completely pay for retirement. Between the cost of a year's worth of tuition and the value of one year's worth of income, the swing in my net worth was over $1 million if I set it aside and let it grow until I was 55. In other words, knowing about and employing that one strategy could pay for my entire retirement.
- I'd just had my first child and have started thinking about how I could set him up for success. Did you know that the average family can make their child a millionaire? The strategy doesn't even require them to find more money in their budget, just to deploy it differently.
- Americans have $4.2 trillion in actively managed equity mutual funds, which could probably be deployed differently for better returns. According to Dow Jones S&P Indices' Scorecard, passively managed index funds outperformed 82% of their actively managed peers over the 15-year period. Not only that, but the fees charged for a passive fund are significantly lower.
Between fees and superior performance, it's very likely that moving your investments from one to the other could improve your returns by at least 2%. Did you realize if you invested a $200,000 portfolio in low-cost index funds rather than high fee mutual funds, historical performance would suggest you would make $600,000 over the course of 20 years? No additional work for you — just an hour or two to research and make the decision. That's $600,000 of lifetime value for two hours' work.
The right small effort, applied today, can yield six figures in the future.
So how do you ensure you're in the know about the best opportunities? We have never lived in a better age for this. The advent of technology allows us to reach well beyond our normal circles and get exposure to the best, most impactful ideas globally. You can build a system to regularly show you the best ideas, and let those ideas stack on top of one another to grow your wealth for you.
Career skills and career-management skills aren't the same thing — and having both will earn you thousands more.
Earning an extra $20,000, $30,000, or $100,000 a year is more achievable than you think.
Career management — figuring out how to position and improve yourself for the fastest promotions and highest compensation — requires a set of skills very few people invest in. All the talk is about the technical skills required to perform one's job. Obviously, you need to be competent in your role, but the skills that make you a good accountant are not necessarily the skills that will help you land a great job as an accountant or get the highest raise once you are an accountant.
An accountant has to have good knowledge of the tax code. She has to be detail-oriented and independent. The additional skills necessary to land a role as an accountant are emotional intelligence, initiative, networking, and negotiation. And these are completely different.
The job I held was a highly competitive one. Before my first interview, I reached out through friends of friends to try to find someone who was already in the industry who would spent 15 minutes talking on the phone with me.
After I did this, I cold-emailed someone at the firm I was interviewing with to do the same thing, hoping that I could get a little background on their specific style and tailor my approach. Turned out the gentleman I spoke with ended up being one of my interviewers, and he told me after I got the job that he'd spoken highly of my initiative in contacting him to prepare.
I also learned a lot during my career about what levers influenced compensation the most. Things like knowing what to look for in an employer and how many years you want to stay at each company for maximum income are factors which will help you achieve 30%-plus annual pay increases.
See the rest of the story at Business Insider