hey miles Becker here miles Becker calm
what is fu money and how is fu money
different from your emergency fund so in
the first video in this personal finance
series we talked about your emergency
fund and the importance of having three
to six months of your living expenses
kind of set aside so that video is
linked to in the description if you
haven't watched that I highly recommend
watching that and getting your emergency
fund together so that brings us to what
is f you money and honestly fu money
stands for you money it is
literally that level of money at which
you can begin totally not caring about
bosses jobs businesses clients etc it is
that level of walk away money and this
is in contrast to the emergency fund
which I would deem as oh money
right like oh I lost my job or oh
I got a panda slap at my websites
not generating income anymore that's
where the emergency fund comes in but
the fu money is definitely that's like
next-level stuff right there fu money is
essentially a number that will allow you
to live off of the interest it generates
or not interest in this day and age more
like the investment return on
investments that it generates and you
can live the rest of your life so there
are people in kind of a blogosphere
writing a lot about this kind of stuff
who have retired very early a lot of
them in late 20s early 30s 40s people
are able to retire and live very
inexpensively on the returns on
investments from very simple index fund
investments I'm not going to get to
deeper than the types of investments
today we're going to talk about that in
future videos this is about the kind of
bigger picture idea right the f you
money level so how does it work right
well there's two variables the first
variable is how much are you spending
every year what is your lifestyle cost
right now and the second variable is how
much do you need to have a safe
withdrawal rate to be able to withdraw
enough every year to pay
you're living expenses but not mess with
the principal
so that can stay in there and generate
more return next year so you can have
your income next year ultimately this is
a form of retirement it's retiring early
and it is the true honest financial
independence level now there are some
numbers there was a study done I believe
it was in the mid to late 1990s and it's
known as the Trinity study and if you
want to look it up the Trinity study it
essentially looks at what the safe
withdrawal rate is for a standard
portfolio and they had it with a couple
of different asset allocations now if
you don't understand what that is that's
fine I'm going to explain it in future
videos essentially an asset allocation
is what percent of stocks and what
percent of bonds held in an index fund
and an index fund is essentially a group
of stocks right so there's one index
fund that I like that literally is every
single stock in the United States of
America so by buying one share of the
index fund I'm holding a tiny piece of
over 3,000 companies all right so back
to that safe withdrawal rate and the
Trinity study now the Trinity study ran
a bunch of models across the history of
the data of our stock market and it
essentially came to the conclusion that
you have a 96% probability of being able
to withdraw 4% of your kind of
investment every year for 30 years plus
and not run out of money so what does
that mean right well if you reverse that
4% that means that you need 25 times
your actual lifestyle costs sitting in a
secure long-term low-cost
investing index fund excuse me and then
in that situation you kind of across the
finish line that is mathematically what
fu money is so let's break it down even
farther right let's say you can live off
of $50,000 per month and real quick the
fastest way to get there is
learn to live on less and save as much
as you can and put it in your investment
fund every single year if you do those
two things at the same time and you get
comfortable living on 50 40 30 thousand
dollars per year and you're able to suck
more and more and more into your
vanguard and your index fund account
that is the fastest path to retiring
early and that's what we're talking
about here so if you are living on and
you can live comfortably on fifty
thousand dollars a year you would need
twenty-five times fifty thousand dollars
per year which is 1.25 million dollars
sitting in an index fund and with that
there you're able to withdraw fifty
thousand dollars per year you'll never
mess with your principal and the honest
odds are and the numbers in the Trinity
study show that there's a better chance
of your principal growing beyond one in
two two and three million dollars by the
time thirty years roll around so the
odds are actually way in favor of it
continuing to grow sounds like a lot of
money though right like 1.25 million
dollars set aside that's you know that's
12 plus years of putting a hundred grand
away if you haven't started yet and
that's okay we can get there the other
way to look at it right so let's let's
tweak it again here and kind of take
another approach of let's see what it's
like if we're living on less and if
you're living on thirty thousand dollars
a year I got the numbers behind me here
so 25 times thirty thousand dollars a
year is seven hundred and fifty thousand
dollars so if you've got seven hundred
and fifty thousand dollars sitting in
index funds you are pretty much low-cost
gotta be a low-cost index fund needs to
be like a quarter of percent or less
preferably less like a tenth of a
percent in actual fees for the index
fund that's Vanguard that's what
Vanguard does is low-cost index funds so
you would need seven hundred and fifty
thousand dollars sitting in and index
funds in order to withdraw thirty
thousand dollars per year and if you can
live off of thirty thousand dollars per
year
you've reached this kind of like fu
money stage right you're able to
literally let go of a job of all sources
of income and you're able to retire at
that
point in time here's the interesting
thing everyone that I've seen and read
about and learned about who have crossed
that theoretical threshold of fu money
they might take some time off they might
travel they might change their lifestyle
a little bit
one thing they seem to do is keep
working they just shift what they do to
something that's fun to them they might
start a blog they might start a YouTube
channel they might start finding
products and doing import things because
they're traveling to low-cost areas and
it's it's really interesting to me that
a lot of people go from a traditional
job they save up they work really hard
for 10 20 years they quote-unquote
retire and then they end up fiddling
around with this internet stuff and they
end up making twice as much as they did
from their website because it becomes a
passion project and that's really what
makes fu money so special is you're not
really saying fu to everybody in to the
whole thing right and you're just going
to sit around watch TV all day that'd be
horrible they'd be a terrible lifestyle
what you're saying is I'm done earning
income in this way and I have saved
enough and I've got my lifestyle down
enough and I've invested intelligently
enough that I'm able to say fu to the
boss I'm done and then you get to listen
to your inspiration you get to listen to
what's in your heart what your calling
is and you get to move in that direction
and oftentimes people seem to find
things that elevate their income even
farther so they're able to add even more
and their nest egg grows and grows and
potentially they can withdraw more every
year and enjoy a growing lifestyle year
over year this is in stark contrast to
the the kind of system that was
explained to me by my parents and that
was explained to my parents by the
grandparents of just get a job and work
for 40 years do 40 hours a week and a
job you don't like and it's okay because
at some point you'll be able to have a
pension in Social Security and
everything will be fine
I don't trust in that system I don't
want to work a job that I don't like I
couldn't do it for more than five years
so why would I ever consider doing it
for 40 years and this is really common
in kind of my generation and the
Millennials we don't want to just go
work some job just because it
says you're supposed to work a job
for four years we want to create
positive change we want to create we
want to do fun things in this world so
this is really an interesting concept
and when I grabbed latched on to this
kind of fu money idea what it did for me
is it gave me a target
right it got me realizing that hey I
need to know exactly how much I'm
spending per year and how much I can
live off of per year and B I need to
start putting money into these index
funds and you start playing this game so
I can be building my f you money account
so I ultimately can have this totally
separate from my business source of
income through my managed assets that
literally I could live off of at this
point I'm going full speed ahead in this
and I'm looking to hit my fu money
number within about five to seven years
and I'm trying to speed up the process
at which I get there just because I
think it'd be fun now here's the cool
part I'd keep making videos at that
point I'd keep posting to my blog at
that point I keep teaching internet
marketing personal finance how to retire
early because I love this stuff I'm
passionate about doing this so it's not
about getting to a point where I don't
have to do this anymore because I love
doing this but it's getting to a point
to where that's all I have to do is that
which I love and that which I get
enjoyment out of and then I can just do
that all the time and that makes for an
incredibly fun life the last thing I'm
going to touch on here is the
requirement for flexibility when you get
to the point we're at 25 X your numbers
sitting in account and you're ready to
retire early having flexibility is
really really important what if the
market goes down what if what if your
your portfolio doesn't make as much
money you know what that's where you can
go to Chiangmai on a six-month visa and
live for five six seven hundred dollars
a month
spend even less and have a year where
you can spend fifteen thousand instead
of thirty five thousand and still hit
your number now playing the global
arbitrage game is absolutely brilliant
it's something I've done for a few years
now it's something you can do too but
know that flexibility is important as
you get to this fu number and the last
last thing I promise this is actually
the last thing if you don't feel like
the
the 25 X or the 4% withdrawal rate the
safe withdrawal rate number is secure
enough if you're like oh man that sounds
a little bit risky go with 30 X your
number right so pick your number
whatever your lifestyle is for 50 grand
a year make it 30 X so be 1.5 million if
it needs to be or if you're at 30 grand
a year to live off of that be $900,000
for you to live off of and that would be
the conservative way of going about it
and I like playing a little bit
conservative sometimes but ultimately
we're building or if you've been
watching my other channels I'm building
a business online that is really really
getting to a point of being near
hands-off and that's generating cash
flow as well so there are ways to
supplement this it's not a hard set rule
it's more of kind of like a target to
shoot at because we don't have big goals
and if we don't have targets were
shooting at we sometimes don't have the
motivation to dig in deep and to put in
the work and to hustle hard it was when
I really dug into my business was when I
was ready to get rid of my student loans
and I had about $50,000 in student loan
debt sitting on my shoulders and my wife
and I just said you know what it's time
to get this done and we dug deep and we
started putting literally three four or
five thousand dollars a month away
towards paying off my student loan debt
that's amazing it became a game it was
fun we didn't have to really suffer in
our lifestyle at all it was still
enjoyable now we're turning that kind of
firehose that we had pointed at that
into this fu money account into our
index funds and in future videos I'm
going to do a whole personal finance
playlist here for you I'm going to talk
more about the investing side of things
what are index funds
what's an asset allocation but I wanted
to give you this big picture idea
because you can grow an fu money fund if
you're a if you work in a traditional
job right you can do it there's there's
no need to be an independent
entrepreneur location independent
entrepreneur or an internet entrepreneur
to do this you can do this from a day
job and in fact most of the people I've
read about who have done this work
traditional jobs and they learned how to
live on a little and they hustle hustle
hustle and they put every extra penny
they could into their investment
accounts it just became a game it became
fun and they were able to unlock and
break out of
traditional rat-race system in their 30s
some in their 20s a lot in their 40s
which is pretty special compared to you
know my parents work late into their 60s
and they're on a fixed income at this
point so let's go ahead and wrap it up
here I do thank you very much for your
time I hope this idea of fu money has
got you inspired and I hope that it
makes sense I would really like to know
if you've watched this far leave me a
quick comment did this make sense do you
have any questions if you have any
questions just put them in the comments
I'm happy to answer them to the best of
my abilities if you're interested in the
study it's called the Trinity study I
will link to it in the description below
and go ahead and give a subscribe click
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know that you're interested in more and
I will be putting out more videos and if
you subscribe you'll get them as they're
released thank you again for your time I
am Miles Beckler and make today a great
day
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