EP255: How to Actually Retire In Just 5 Years… Starting from Scratch!

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Little known fact – you don’t have to wait until you’re old to retire. 

It’s true. A life of freedom, leisure, adventure, or whatever you want it to look like can be yours so much sooner, and we’re here to tell you how! 

The sad thing is that this sounds crazy, because we’ve all been lied to about the reality of retirement – indoctrinated from a young age to believe that it’s what happens after you’ve lived your life. 

And you may be wondering who are these two girls you are learning how to retire in 5 years from, well, we are multifamily apartment investors managing over $300 million dollars in multifamily apartment portfolio.  So growing your wealth fast and helping you reach your retirement goals in 5 years is our jam.

You remember the proper order of things, don’t you? Go to school, get good grades, get a good job, and eventually walk off into the sunset to enjoy your golden years.

Well, we have some pretty big issues with that. For starters, it’s wild to think that kids are taught that retirement is the goal, but aren’t actually taught how to reach it. Talk about not being set up for success at all. 

Oh boy!  On top of that, we really object to the whole wait-until-you’re-done-living-to-retire thing. No thanks. We’d rather retire long before we’re old and gray, and be able to enjoy our lives without financial stress, wouldn’t you? 

Thankfully, there’s a better approach, and it starts with taking back the narrative about what retirement looks like, and how to get there. Today we’re sharing the same plan we used to retire early, and how you can do it too!

Do you remember a time when smoking was considered healthy for us? Your grandparents might, because that’s what everyone thought, back in the 40s. Of course, as more research and data presented itself, we all found out how wrong that idea really was, and now our views of cigarettes have drastically changed. 

You might be wondering what could possibly be similar about retiring and smoking, so here it is. Retirement is also one of those things that desperately needs a PR revamp, because the way it’s thought of is outdated, and yes, even harmful. 

At some point along the way, we were fed this silly narrative: if you can save about 25 times your annual income, you can comfortably retire in your later years. So, if we follow this metric, a couple who makes $150,000 per year needs to put away at least $3.75 million to retire eventually. And how exactly are they taught to get there? Scraping and saving pennies, resisting the urge to buy delicious coffee treats, and letting savings accounts build up nickels and dimes in interest? 

It’s not going to happen. Approaching retirement like this is why so many Americans find themselves financially struggling in their later years. In fact, a study by AARP reports that 1 in 4 Americans over 50 are saying they don’t expect to ever be able to retire. 

Oh no! That doesn’t sit right with us at all.  So, here’s where we totally redefine retirement, by using your freedom metric. 

Your freedom metric is the amount of money you’ll need to cover all of your expenses after you’ve stopped working. And listen, if not working isn’t your idea of a happy life, then by all means, keep your day jobs, side hustles, passion projects, etc. The point is that retirement offers you the freedom to completely choose how you spend every second of your time.

Financial freedom is the ultimate goal here, because then retirement can look like whatever you want it to look like. And we can tell you from experience, that financial freedom is absolutely accessible. It starts with finding your unique freedom metric, and reaching it with passive income – which is money you make that’s not at all tied to your time or energy.

The math is super simple. If you have $5,000 in expenses every month, you’ll need to generate $5,000 in passive income to sustain your lifestyle without needing to work another day in your life. Reaching your freedom metric gives you financial freedom, but what you choose to do with it? That’s entirely up to you! 

Now, once you know your freedom metric, it’s time to move onto phase 2 of your early retirement plan, which involves a bit more effort. But trust is, the results are well worth it! 

If you want to reach financial freedom in the next 5 years, you need to create a strong financial base, and we’re about to share the 6 steps to getting there. 

Step one involves paying off your high-interest debt, ASAP!  Have you ever tried to fill a bucket of water that had holes in it? Impossible, right? That bucket is never ever going to get filled.  Well, if you’re trying to reach financial freedom and retirement, but have high-interest debt holding you back, it’s the same story. We need to plug every single hole first, or else your income will just flow out quicker than it comes in. 

Remember, good debt helps you make money, but high-interest debt eats your money and slows you down.

The avalanche method is a great way to start tackling your high-interest debt by always meeting your monthly minimum payments, and using extra money to pay down your debt with the highest interest rates first. 

Step two is where you begin to build an emergency fund. 

A squirrel doesn’t wait to search for acorns until snow is falling. It stores up enough food in the spring to last all winter! That’s what you need to do with finances, starting now. 

This will be your emergency fund, which is important to have as a part of your strong financial base, on the way to financial freedom.

Once your money is put to work in passive income-earning investments, you don’t want to have to pull it out to cover unexpected expenses. Being prepared ahead of time is key! 

In step three, it’s time to build up a great credit score. 

You wouldn’t apply to a new job without an updated, quality resume, would you? Your credit score is like your investment resume. It shows lenders that you are a qualified, worthy borrower. 

Start with making small credit card purchases each month, and paying them off in full to build up your credit score resume. 

Ready for step four? It’s all about reducing your tax liability. 

The way you earn income will determine how much you owe in taxes, and paying attention to this will make a huge impact on your financial base and passive income earnings. Robert Kiyosaki’s income quadrants help illustrate the different ways to make money, and how they each impact your taxes. 

The four quadrants are Employee, Self-Employed, Business Owner, and Investor. Employee tax is taken right out of paychecks even before they see a dime, followed by Self-Employed who end up paying taxes as both the employee and employer who end up paying the most with almost 60% of their income going towards taxes.

And Business Owners with 500 or more employees, who still owe a lot, but can take it down with business expenses. Then there are Investors, like us, who pay the least in taxes because of investment earnings and special tax advantages. 

Adjusting how you earn money will definitely decrease your tax burden and help you build up passive income to meet your own freedom metric. 

Step five involves a super smart way to save for the future, by using a Roth IRA. Regular savings accounts won’t do you any good on your journey to early retirement, but a Roth IRA lets you put in money that grows tax-free, and take out when you’re ready to retire. 

Finally, we’ve reached step six – overfunding your life insurance. 

Whatever amount is required to keep your life insurance policy active, we recommend putting in extra. That extra money will grow over time, and can be used in different ways. 

Did you get all that? Creating a strong financial base is the second phase in your 5-year retirement plan, following establishing your own freedom metric. 

Now, it’s time to discuss phase 3, which is opening multiple passive income streams to fund your dream lifestyle. 

Remember, passive income is the money you earn that doesn’t require your time or energy. It isn’t tied to any sort of job, and will continuously cover your expenses whether you want to work or not. With enough passive income coming in, you’ll be able to reach your freedom metric and enjoy true financial freedom. 

There are plenty of different ways of earning passive income, but the key is to start with what you know. Then, as your passive income grows, you’ll have more time freedom to lean into your passions and focus on what you truly enjoy. 

Here are some great options for growing passive income: 

Real estate investments can offer regular income with minimal involvement, making them a great choice for starting your passive income journey.  And our bread and butter are of course multifamily apartments and build-to-rent development.

Other investment choices are dividend stocks, which pay ongoing dividends over time, or Index Funds and ETFs, which will grow with the market. 

Peer-to-peer lending allows you to earn interest back while lending money online, high-yield savings accounts help you earn more interest on your savings, and affiliate marketing lets you earn commission by simply promoting products. 

If you love creating things, you might try creating digital products, software, apps, or printables that can be easily downloaded, or consider selling online courses, books, or music that can earn you royalties without any additional effort. 

Automated online businesses are great because once you set them up, they pretty much run themselves. 

All of these options are great ways to try your hand at generating passive income. You won’t get rich right away, but trust us, the best way to achieve early retirement and financial freedom is to set your freedom metric, establish a strong financial foundation, and open multiple passive income streams. 

You’ll hit challenges along the way, of course, but staying consistent and following this 3-phase strategy will set you on the path to living the life of your absolute dreams.

Now that you’ve learned how to retire in 5 years, if you want to get rich don’t save do this instead, go watch this 🎥 video!