Everyone has their own methods of investing and saving. I also have my own ideas and goals, but they may not make much sense to someone else. Often times when I tell someone I plan on retiring earlier than the age of 55, they think I am lost in this world and that this notion of retiring early is impossible for someone like me. I may or may not be ahead of my peers that are about the same age but I feel like I have made some great strides in the right direction. I try not to compare myself to my peers because everyone has different goals in life. Some people want that family and big house with a pool lifestyle. This is actually what most Americans want in life. I on the other hand have never been materialistic. Do I drive a decent car and wear decent shoes? Well let’s see, I bought my 2002 Cadillac Deville for $3,500 from an older gentleman and I bought my Nike Air Max shoes on the clearance rack for $75. The point here is I don’t need the newest Cadillac or pair of Nike shoes. I am content with the 12 year old car with 100,000 miles on it and the pair of Nike shoes that nobody wears anymore.
I have made some serious life changes in the past year. For example, last year around this time, I only had $5,000 in my savings and a 1998 Ford Mustang to my name. This year I have over $20,000 in assets and a 2002 Cadillac Deville to my name. All I had to do was cut out my expenses. I still work the same $30,000/year job. It’s much easier to ditch the expensive car insurance, phone bill, and partying lifestyle than it is to work more hours or find a higher paying job. If my parents taught me how to invest at an early age I would probably be sitting pretty right now. However if you had a poster for the typical American family with a cottage, pool, deck, 2012 Ford F-150, Hyundai SUV, big yard, barn, doggie, boat, new kitchen, etc. Yes, that would probably be my parents on that poster. I don’t think there is anything wrong with this lifestyle and my parents are very happy, however I knew that I needed something different in my life. I don’t ever intend on being rich, but I would love to be sitting on a million one day. Some people might think having a million dollars is being rich however I would love to disagree.
So how does a low middle class worker making $30,000/year like myself plan on retiring at the age of 55? Well first of all I have 25 years to invest/save all the money that I earn. I have the power of compound interest and time on my side. I am excited to announce that I am officially 1.21% retired. Your probably wondering how I came up with this number. I came up with the simple formula while I was at work the other day. I currently receive a total of $302.63 of passive income every year. This includes all my dividends and interest for the year. I could live off of $20,000 for the year, but in order to retire comfortably I want to receive a total of $25,000 in passive income each year. So here is the formula (Percent Retired=Current Annual Passive Income/Future Retirement Passive Income) (302.63/25000=1.21%). I am only 1.21% retired at this point in my life. This is just a generic way of me knowing how close I am to retirement. So how far are you from retirement?