Berger - Retire before mom & dad: the simple numbers behind a lifetime of financial freedom

Arthur Conan Doyle

A young man was living a normal life. He worked in a cubicle by day and spent time on his computer at night. By all outward appearances, he was as normal as normal could be.

But something inside him said that life wasnt as it appeared. There was something not quite right in the world, but he couldnt figure out what it was. What he didnt know was that the world as he saw it was an illusion. He was being tricked into living a normal life so that he wouldnt discover the truthand his potential.

That all changed when he met a guide. The guides name, as you might have guessed, is Morpheus. And our heros name is Neo.

In the movie The Matrix , Morpheus explained why Neo felt that there was more to life than meets the eye:

The Matrix is everywhere. It is all around us, even now in this very room. You can see it when you look out your window or when you turn on your television. You can feel it when you go to work, when you go to church, when you pay your taxes. It is the world that has been pulled over your eyes to blind you from the truth.

As with Neo, the world has blinded us from the truth. In the movie, the Matrix created the illusion that the world was normal. In our world, the deception weve come to believe about money and happiness comes from many sources. It comes from TV commercials, our parents, our friends, complete strangers, magazines, and the internet. Sometimes the lies are explicit, and sometimes they are subtle. But they never stop.

I call them The Five Lies.

The world tells us that the average person cant achieve Financial Freedom. Unless you make a six-figure salary, are born into money, or win the lottery, you can forget about becoming a millionaire or attaining Financial Freedom. Lie #1 tells us we are destined to live paycheck-to-paycheck. This lie is easy for us to believe. Our minds play a trick on us. Let me explain.

Imagine somebody making $50,000 a year their entire adult life. Even if they saved 10 percent a year ($5,000), how could they ever become a millionaire? If they worked for 45 years, they would have saved $225,000. Sure, they may have invested their money and made some interest, but it couldnt possibly take them from $225,000 to $1 million.

Or could it?

Would you believe that it could take them to $3,421,620.11? Thats what our $50,000 a year earner would accumulate over their working years if they invested $5,000 a year (about $416 a month) and earned an average investment return. We will explore this in depth later in the book.

The world tells us that maybe, just maybe, and if we are lucky, we may be able to retire in our late sixties or early seventies after a lifetime of hard work. And thats only if we scrimp and save diligently, and deny ourselves lifes little pleasures along the way. And it tells us that if we do achieve Financial Freedom, well probably be too old to enjoy it.

Once we believe Lie #2, we dont see Financial Freedom as a goal worth pursuing. Either well never reach the goal (Lie #1) or well have one foot in the grave when we do. Lie #2 sees Financial Freedom as a destination decades away.

In reality, Financial Freedom is a journey . And we can begin to enjoy the fruits of Financial Freedom very early in that journey.

The world tells us that true happiness is expensive. The American dream requires a big home, two fancy cars, an 80 TV, and world travel. Without this stuff, were missing out, and were not living life to the fullest. We hear this from the companies who, conveniently, want to sell us a big home, two fancy cars, an 80 TV, and world travel.

Lie #3 is the most pernicious of all of The Five Lies. It uses our own habits against us. We so often spend money not from deliberate choice but from the habits and routines of life. Once these habits form, they are difficult to break.

As famed investor Warren Buffett has stated, chains of habit are too light to be felt until they are too heavy to be broken. Once we have formed habits, changes in the way we spend money and changes in our daily routines seem painful. It feels like a sacrifice to do without or to cut back. Its then that we find ourselves in the clutches of Lie #3. Like quicksand, its difficult to escape.

The world tells us that investing is complicated, confusing, risky, and scary. The investing world uses jargon that we dont understand. How can we possibly be expected to make good investing decisions any more than we should be expected to perform brain surgery?

Lie #4 may have caused you to give up. Perhaps you havent invested in your companys retirement account. Perhaps you dont invest on your ownlife is hard enough without having to worry about the stock market. Maybe youve hired somebody to help you, but you have little understanding of the important decisions they make about your financial future or how much they charge you.

What if investing were incredibly easy? Imagine creating an investment portfolio (yes, you can have an investment portfolio at any age or on any income) with just a couple of investments. Imagine spending no more than about 30 minutes a yearyes, a yearto maintain your investment portfolio.

Finally, the world tells us to accept debt as a fact of life. Everybody has debt. Some will even tell you its part of growing up and being a responsible adult. From school loans to car loans, credit card debt to a mortgage, debt is the way the world works.

Lie #5 makes us feel better about going into debt. Perhaps we tell ourselves that its good debt, whatever that means. Combine this lie with the belief that happiness is expensive and we start to fund our lifestyle with credit cards. We decide if we can afford something according to whether we can make the monthly payment. Car salespeople even help us to make the calculation.

And then maybe, just maybe, we meet somebody who doesnt have debt. We look for signs that they are different. Perhaps they live with their parents or in a camper.