Buy What Thou Hast No Need Of, And Before Long Thou Shalt Sell Thy Necessaries. — Ben Franklin
The street smart philosophy about building wealth is simple at its core — building wealth with smart financial decisions!
Most people don’t build wealth not because they are not smart; they don’t build wealth — for most part — because they are gullible and easily buy into the notion that wealth is either inherited or strikes the doors of lucky few.
Reality is starkly different. Building wealth takes astute planning and flawless execution with smart financial decisions.
We make choices everyday. Those choices are seeds for the future landscape of our destiny.
I want to share story of my cousin who lives in India. He is a living proof of someone who has built wealth with smart financial decisions early on in his life.
He retired since 1992 after working for only 10 years as a Chemical engineer for Reliance, a large fortune company in India. What he shared with me recently is worth sharing with anyone who aspires to retire young and build wealth with Mr. Money Mustache like acumen.
1. Have end goal in mind to build wealth.
If you wanted to retire early or build wealth when you are young, set a financial goal to accumulate the amount that allows you to achieve your freedom.
Having a financial goal allows you to adjust your lifestyle to save required capital every year so that you can retire within the time frame of your choosing.
My cousin was saving 70% of his salary for the first 10 years. It was difficult, but he was motivated to do so for the ultimate freedom.
2. Know how to live after taking sabbatical.
In Asian culture — and especially in India — it’s a norm for father and son to live together. Considering that there is no government welfare system in place, this tradition provides best of both world for everyone. Son gets to live in a mortgage free home while he takes care of his parents in their golden years.
My cousin moved back to his hometown after quitting a well paid job. He also got rid of his car as he can use public transportation or a two-wheeler when he travels occasionally.
These ideas are bit extreme for the western culture to embrace. Nonetheless, you can plan on paying off your mortgage the day you retire.
I know that low-interest rates and mortgage deductions are too good to pass on. Believe me, if your goal is to retire with ultimate freedom, you are better off knowing that you have a place of your own.
3. Make smart financial decisions.
Your financial well-being depends on making smart financial decisions to grow your nest egg once you have freedom to invest in your own future.
My cousin did nothing for a year after retiring. Well, he did plunge himself into learning different ways to protect his nest egg and grow it wisely.
He invested a portion of his capital into real estate and rest into dividend paying stocks and/or debentures.
He carefully picked real estate locations in early 90’s right before Indian government opened doors for the rest of the world. With the economic boom of the past decade, his real estate investment alone has grown into multi-million dollars asset.
Due to his minimalist lifestyle, he has managed to live off of the interest income from portion of his savings in CD and debentures. You may be surprised to know that 9-10% return is common for most CD accounts in major Indian banks.
He has generated wealth at a fast pace in the last decade due to the snow ball effect of the real estate boon and dividend reinvestment.
My cousin has certain advantages that most Americans don’t have. He lives with his father and seldom spends any money on transportation or big vacations.
Nonetheless, if you wanted to retire, you can commit yourself to start saving aggressively early on by taking advantage of changes in savings rate, and pay off your mortgage as soon as you retire.
At that point, you are free — from ball-and-chain of financial worries feeding your anxieties — to build wealth with smart financial decisions at your pace.
Isn’t it wonderful to give up chase for possessions to have time and freedom? I think so.
Readers: Have you considered retiring early? If so, do you have a plan in place to achieve your goal?
Photo by: Chrismarper