Tuesday, May 21, 2024

The Road to Financial Freedom Is Shorter Than You Think

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If you grew up in an American household, you have an idea of what the “American Dream” entails. You’re born into a middle-class family. You go to school for the first 18-22 years of your life. You enjoy a nice career for 40-50 years. All while getting married, having kids, and climbing the corporate ladder. You retire at age 65 and have a nice nest egg to tap into so you can live out your remaining years “financially free.”

Sounds great, doesn’t it?

40 Years?!?

Rewind the tape … 40-50 years?!?

Am I the only one that thinks that’s an incredibly long time?! Let’s break that down. The average American life is ~80 years .

It can be segmented into 3 parts: school for the first 22 years (assuming a Bachelor’s degree), work for the next 40-50 years, and then retirement thereafter. To help visualize, check out the box below:

Conventional American Life = 80 years

American Dream vs. Nightmare Picture 1

Look at that box. For about 80% of your life, most of your time is dedicated to achieving that final 20%. By the time you reach that final 20% (age 65), you will not be able to move like you once did, your kids are likely adults and your parents have either passed or are extremely old.

In other words, of the 80 years that you will live, only 15 of those years are doing things that you truly love with the people you truly enjoy. Most of which, you likely will not be healthy enough to fully appreciate.

Not to mention, you may not make it to 65. I don’t mean to be morbid, but there are countless stories of hard working people dying in their middle-aged years. Whether it be from a tragic accident, an illness, a natural disaster, etc.

If this is the “American Dream,” I need to either leave this country or wake the hell up.

For now, I will choose the latter.

Related: Behind on the Path to Financial Freedom? Here’s the Good News You NEED to Hear

A Different Approach:

If you have not read Scott Trench’s book, Set for Life, you are doing yourself a serious injustice. $20 and a few hours of your time will save you multiple years of hard work making your boss rich.

I promise that I do not get paid a penny for plugging Scott’s book. It is legitimately a fantastic book that everyone who desires early financial freedom (or retirement) should read. Even if you are approaching the conventional retirement age where the concepts may not apply, you can give it a read and instill wisdom in the generations to follow.

By living frugally, saving at least 40% of your income, and investing in high yielding, passive income streams (i.e. real estate) you can significantly expedite your “retirement” or achieve “financial freedom.” And I’m not saying retire at 62 instead of 65. I’m saying retiring in the next 5-10 years. Depending on your age, this could be as early as your late-20s or early-30s.

Let’s see how this “box of life” looks.

Life of the “Financially Free”

American Dream vs. Nightmare Picture 2

With the Set for Life formula, you are tripling your “freedom” time and halving your “working” time. You will have the optionality to do whatever the heck you want for 45+ years (age ~35-80).

You can dedicate 100% of your time to your family. You can travel, golf, ski, or play video games whenever and for as long as you’d like.

Heck, you can still work if that’s what you prefer.

But you will be able to work wherever you want because the pay will not matter. You will know that in the back of your mind, you do not NEED that job. As a result, your stress levels will be significantly lower than those who could not survive without one.

Not only that, but you will be doing something you love. For many people, that’s much more fulfilling than a fat pay check.

It’s NOT baloney:

As you embark on your journey, I’m sure you’ll get excited and try to explain your goals to friends and family who are living conventional lifestyles. You will soon find that most of them will not understand. Most will call, “baloney” or shrug you off and say, “yeah, okay.”

That’s fine. Do not let them bring you down. If you feel like you need someone to talk to who has a similar mindset, jump on BiggerPockets and message someone in your area for coffee. There’s a high probability they will think similarly and re-motivate you if you feel you need a lift. I do this ALL the time.


The Numbers:

If you’re reading this and you think I’m full of baloney – or if you believe me, but want to show the non-believers the numbers, read on.

Let’s run the numbers with the following assumptions:

  • You are making a salary of $65,000 per year
  • You can save 40% of your income
  • Your return on investment is 10%
  • You are 25 years old
  • You receive an average annual pay increase of 3% to keep up with inflation

How the heck do you save 40% of your income? Explaining exactly how is beyond the scope of this article, but let me brief you. The average American spends ~50% of their income on housing (33%) and transportation (17%).

By removing these expenses through house hacking and riding your bike to work or working from home, you can save upwards of 50%. Not to mention that if you want to go the extra mile and life hack by renting out your car, you can save even more.

Does a 10% return on investment seem unreasonably high? By investing in real estate and having the four wealth generators working for you, you will see that it is absolutely a reasonable (if not conservative) assumption.

Here is what the numbers look like assuming you are starting with $0 at age 25.

American Dream vs. Nightmare Excel

Related: How to Achieve Financial Freedom By Calculating Your “Rat Race Number”

You will see that with these assumptions, by year 10 (35 years old) you will have over $50k of passive income. That is certainly enough to live a sufficient middle-class lifestyle without needing to work.

Do you feel as though you need more? Keep working until your passive income reaches the lifestyle you want to live.

You can see this file in as the Excel version here. Feel free to play with the model to see where you stand.


I encourage you to take a step back and reflect on what matters most in your life. When you look at the average lifespan of an American, less time is spent on what matters most like family, friends, or other hobbies: travel, video games, golf, skiing, etc.

This is why BiggerPockets exists. We seek to educate the middle-class American and show them that there is a way out of the rat race. To show them that there is a life out there to be enjoyed. And you do not have to wait 40-50 years to get there. We show how it can be accomplished in as little as 5-10 years through real estate investing.

No one said achieving this goal was easy. However, with some self-discipline and determination, it is much more possible than everyone seems to think. You will experience setbacks along your journey. Keep pushing. Keep your eyes on the goal of financial freedom.

You will get there before you know it!

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What are your tips for finding financial freedom? Tell us in the comments section below!

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

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