Setting My Sights

Do you know that feeling where you’ve got the next few years all figured out but everything past that is a giant white hole of nothingness? In middle school, high school was this great unknown, in high school I had absolutely no mental image of what college life would be like, and now here going into my junior year of college, it seems like all the goalposts here will soon be passed. Past that, I have no idea what to expect. What’s next? Where do I set my target as I start adult life?

I’ve been reading a lot about financial independence in the past few days, because financial independence is an ancillary goal that makes a lot of other life goals possible. Specifically, I tore through Rich Dad, Poor Dad, No More Harvard Debt, and the blog of Mr. Money Mustache (MMM, who is quickly becoming a personal hero). And I’ve realized just how skewed my view of money is. I was lucky enough to have been taught well enough by my parents to never carry a credit card balance and pay off your debts early, but that information on its own was only probably ever enough to keep me from seriously shooting myself in the foot. I didn’t know that the way the rich made money- through the interest off of investment – was something anyone could reasonably do. And  I had never thought of dollar bills as little workers, who, when put to work in the right places, will give you 7-8 cents every year, forever. Gamechanger.

Of course, I’m not inheriting any family nest eggs that will turn me a steady profit the rest of my life. I’m going to have to build one myself. Luckily, as Mr. Money Mustache points out, this won’t be hard at all. It just takes a willingness for frugality and a focus on what you really need. The idea behind financial independence is simple: for every dollar that passes into your hands, treat it like a quarter. Invest the other 75%. In 7 years, you will be done.

How long it takes to retire at give savings rates

The magic graph: the time to retire based on your savings rate. At 75%, it’s 7 years. At 60%, it’s 13 years. At the recommended 10% savings rate? 51 additional years. Most people die before then.

7 years! I’m going to graduate college at the age of 22 1/2. At this high savings rate it will take me half a year to pay off student loans, meaning that on my 30th birthday as I cut the cake, I could retire, financially free for the rest of my life. And yes, this all includes inflation.

The catch is that the remaining 25% of your gross income becomes your working income. So if I make (hypothetically) $80k per year in a decent engineering job, I’ll actually take home $20k. But considering  that after the first 7 years this $20k/year is absolutely free, that’s not such a bad deal at all. And especially considering that of all of the things that make us happy, such as close loved ones, good and active health, freedom of choice, and purchasing experiences over things, a gross high income is not among them. The rest of MMM’s blog is dedicated to cutting out the financial fluff that, in the end, isn’t necessary and doesn’t really do anything to make you happier. It’s the difference between the wealthy and the rich.

Retiring at 30 doesn’t mean I’ll never work again – it simply means I won’t have to. I’ll finally have the freedom and choice to live how I want to and work on the projects that matter to me. Isn’t money supposed to buy us freedom?

All the same, past that 30 year mark is the same white unknown that has presented itself again and again. I don’t know what I’ll do once I get there, and I have no idea what’s in store along the way. But that’s to think about another day, and for now my sights are set.

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