Retirement Intelligence 101 Part 2 What you need to Retire

In Part 1 we said we need $64,000 per year to retire. In Part 2 I’ll discuss some options for how to get this without working.

To my knowledge in 2018, these are ways you can make money without working:

  • Licensing deal: you help someone else’s business and in return they pay you for that help for the rest of the life of that business. An example might be you create a new toothbrush holder. Someone with a business like Walmart will buy your creation from you, then manufacture and sell the toothbrush holder you designed and for every one they sell, they give you some of the money they get. Another example is you work in a movie as a lead actor. Then every time someone buys the movie, you get some of that money.
  • Investing: just by having money, you can make money. This is a big topic so I’ll just stop at the main point.
  • Business Ownership: Similar to investing, you buy or create a business that hires employees to work for you so that you don’t have to work yourself in order to make money.

Each of these options has a varying range of success.  A key point is that Licensing and Business gives you money because of work you did in the past, and your future earnings is dependent on the success of the work you do.  Investing is much safer, because it’s dependent on the success of the world. Eventually, you want your core income to come from a reliable source, and investing is that reliable source.

The current term for this idea of being financially independent and retired early is called FIRE and there are multiple resources on this that go into more detail so I’ll leave a few links for you to read if you want more detail, and just cover the basics here.

https://twocents.lifehacker.com/the-basics-of-fire-financial-independence-and-early-re-1820129768 

http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/ <- $4 per $100

What is investing? It’s making money out of money. It’s magic. It’s breaking the laws of what you think is allowed.  But capitalism strongly supports this: if you have money, the system is designed so you can get more of it by investing.  If you live in capitalism, investing is its core.

How much money can you get from investing? The real answer ranges from 0 to infinity, but there are specific strategies geared for retirement that you can hire someone else to do for you.  So given that you hire someone else to do it for you, how much can you get from investing? Well, roughly for every $100 you invest, you can get $4 per year to spend. (For the purpose of simplifying investing, we will go with that. The second article above can go into more detail as it is a complicated subject.)

Doing some math

x * ($4 / $100) = $64,000
x = $1,600,000

we find that for the Average American to retire in 2018, they would need to have $1,600,000 cash.

Some of you may look at this and go: that’s never gonna happen. $1.6 Million?? How can I ever get that much money when I barely make a fraction of that?  The answer is financial discipline, tax saving, and leverage. And we will get into those topics in part 3: how to achieve financial independence and retire early.

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Retirement Intelligence 101

Welcome to Retirement Intelligence 101, a series on how to retire.  We will first define what it means to be retired by listing a few details that describe the state of being retired.  Then we will define what you will need in order to be retired.  Then we will discuss what you can do to get what you need in order to be retired.  1. How to get 2. what you need 3. to be retired.

As a Legal Disclaimer: None of this is financial advice so don’t sue me.  Evaluate what you read with your own judgment. I am just sharing my thoughts and opinions.

Let’s dive into Step 1.

What it means to be retired to me is you have the following taken care of for the rest of your life:

  1. Necessities (Food and water, Shelter).  You will never have to worry about being able to afford some form of this in order to stay alive (quality of food/water/shelter is not guaranteed)
  2. Emergency Protections (Insurance premiums paid for, budget for emergency expenses). You are unlikely to have major expenses come up like going to the hospital and getting a large bill, but if they do you are prepared for the bill because insurance will pay a lot of it and your emergency savings fund will pay for the rest of it.
  3. Inflation.  You don’t have to worry about becoming poorer over time due to inflation. (Google for “Inflation” to learn more)
  4. Your life improves over time. You won’t be stuck in the same lifestyle for the rest of your life.  As you age, you get more money and you can buy more and better things.
  5. Budget for fun. You have money to do what you want, and over time you get more money to do what you want.

And the key point is all of this is possible without you doing any work as an employee. 0 work as an employee, you get this. For the rest of your life. That is retirement. It’s also financial freedom.

We can add up the budget for all 5 categories to come up with the total amount of cash you expect to be able to spend per year.  Let’s say it’s about $51,000 based on the spending of an Average American (article here) which is $64,000 per year before taxes.

To retire you will need to somehow get $64,000 per year before taxes.  Without working.  How do you get money without working?  Stay tuned for the next post where I tell you that answer!

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Do you know what the difference is between Hi, Hey, and Hello?

In this article, we will increase our observation skills by digging deep into the meaning behind the greeting.  What is someone saying when they use different word choice like Hi, Hey, or Hello?  Let’s begin by analyzing the words themselves.

Hi and Hello both express a greeting, and that is their only meaning.  Hey is a word that both means a greeting, and it means a interjection.  “Hey stop that” for example.  Thus, Hey is a more aggressive term than Hi or Hello.  So why would you ever use a more aggressive term to greet someone?  The answer is baked into psychology: You can treat your friends worse than strangers because you know they will forgive you and they know you don’t mean it.  As a result, Hey becomes an acceptable greeting and it is a mark of close friendship. Alternatively, if the two people are not friends and Hey is used as a greeting, it can be a mark of disrespect.  When you’re meeting someone new, you generally don’t open with animosity because that would be picking a fight. When you meet someone new, you generally want to go neutral, so you’d say Hi or Hello.  So now we’ve figured out the difference between Hi and Hello, and Hey.

What’s the difference between Hi and Hello?  First observations are that Hi is shorter than Hello, so therefore it takes less time to say Hi than it takes to say Hello.  This can be interpreted two ways. One way is if the person is lazy, they will say the shorter word Hi.  Showing laziness is a form of disrespect: I don’t care to present myself with energy because I don’t see you as a threat or worthy of my attention and energy.  Alternatively, this can be interpreted as respect: I don’t have the right to speak, so I’ll limit my time speaking and instead leave more time for you to talk.  How do you know which is which? The tone of voice. If the Hi is weak and very short (and often high pitched), then they are afraid an it is a sign of respect.  If the Hi is strong (and often low pitched) and drawn out with lazy energy, then it’s likely a sign of disrespect.

There’s more we can dig into, such as the number of beats the person spends on each syllable of the greeting, and the direction of the tone (is it Hi with a high pitch dropping down, or a low pitch curving up, or the same pitch monotone), but I’ll focus instead of on eye contact because that says more about the situation.  The angle of the person’s face in relation to yours says a lot about the greeting. The general rule is if they look down, they are submissive to you as if they are bowing to you. If they look up, they are superior to you because they are looking down their nose at you. If they look at you head on, then they are present with you in the moment. This signal, in addition to the signals above, can give you a more holistic picture of the interaction and therefore more confidence in your interpretation of the interaction. It’s more reliable to see many signals that agree with each other than to focus on just one signal alone.

To summarize briefly the pivot points

  • word choice (Hi, Hello, Hey)
  • angle of head (up, down, level)

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