Wednesday, October 19, 2016

How To Retire at Age 30

When I was in my 20s, I paid off $2,200 in credit card debt and saved up $5,000. I quit my newspaper job, moved to Europe and retired. I lived cheap for a long time in Greece. This was a life-changing experience for me. Now 53, I look back at my diary from 1990 with amazement and wonder at all the places and people I met in Europe. I did not have a real job for six months, although I did work part-time at a hotel in Athens.
Michael Hooper in Santorini, Greece, 1990

Today, youth face much greater challenges. I only had $6,000 in debt from college loans when I graduated in December 1987, and my monthly payment was just $55.00. Today, students are graduating with astronomical levels of debt. Many youth will be paying student loans for the rest of their lives. If you have $30,000 in student debt, you could pay it all off in five years with aggressive payments of $566.14 per month (5% interest).

Let’s say during that same five-year period, you save $433 per month, and you automatically invest the money into the S&P 500 every month through a brokerage account at Charles Schwab or TD Ameritrade. At a 10% annual rate of return, you will have $34,113 in five years.

Let’s say you start doing this plan immediately after college at age 25. This five-year plan requires $1,000 per month going into debt service/investments. You may have to work overtime or a second job. By age 30, you are debt free and have a substantial investment account.

You move to one of the best cheapest places to live, like Thailand or Vietnam or Argentina, where you only have to spend $300-$400 per month for an apartment. You live cheap, you make your money last a long time.

I met several people who lived many years on their savings. When I was in Greece, I met a 32-year-old chemist from Chicago who had saved enough money for two years of travel. I lived six months on $5,000 in 1990. I could have stayed working at the hotel in Athens, and extended my trip, but I wanted to return to America for a regional reporting job. Plus I was broke and tired of living like a vagabond and missed my friends and family in the states. I had been sleeping on park benches in Barcelona.

Americans will have to sacrifice to live below their take-home income. But this can be a good thing. It's cheaper to cook food at home than to eat out. And the food at home is probably better for you. I know a poor man who is extremely healthy because he lives on rice and beans and rides his bicycle daily and works in his garden. Steady incomes don’t necessarily translate into healthy living. Two thirds of Americans are overweight.

Dreamers who are serious about retiring early must live cheap. They work hard at their jobs.  They take a sandwich with them to work and snack on popcorn. At the end of each day, they cook a good meal for themselves. Their passions don’t cost much. A walk through the park with the dog, a stroll through the garden, a trip to the library -- all these cost nothing, no money spent, yet you might witness a glowing sunset or find a great movie to borrow from the library.

Why did I retire at age 26? To see the world, to experience new cultures, new people, new ways of thinking and living. I wanted to be like Hemingway and Fitzgerald, I wanted to live overseas and look back at America. I wrote several short stories that revealed in me some truth about who I was and what I was doing with my life. I went to Europe to suck out all the knowledge and wisdom of thousands and thousands of years of civilization. I did not want to look back on my 20s and 30s and say I did not live.

I discovered a secret for better living in that special experience. To live each day like an adventure, like I’m going on a special trip, to see a new place, to carry on a new conversation, to go somewhere I had never been before, with people I never knew, and to cherish and love my family, my friends and my home.

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