Question For You Achievers!

[Hyperborea]

It seems that a few people on this board missed my point, and that is if you can find a way to leverage yourself and/or your money (real estate, your own business, writing and selling books, being a musician or athlete or speaking to audiences, whatever, there are lots of ways) you can achieve super-early retirement and with more (sometimes a whole lot more) money.

If you can find a way to do so and do it successfully then maybe you can retire "super-early". The problem is that most who try to "leverage themselves" fail. Only 1 in 6 new businesses are around after 5 years and many of those that survive are probably not paying enough to fund a "super-early" retirement. Most musicians aren't mega rock stars getting only the red M&Ms in the candy bowl in their dressing room - most are struggling along doing music teaching or some other day job to pay the bills.

So, while this "leveraging" can pay off for some it's kind of like those who win the lottery claiming that the way to retire "super-early" is to win the lottery. Now this "leveraging" is somewhat different in that it requires a lot of hard work but that hard work is the same for those who leverage to the upside and those who leverage to the downside.

If you've retired "super-early" with such a high-risk leveraging strategy then you've probably worked hard and are to be congratulated on your good fortune.

[Beachbumz]

Hyperborea, I sure wish I knew how to put in quotes like you, but I'm not that smart. But for the record we DID retire at 36 years, 2 months for me, 35 for my wife, using this strategy, which I don't consider to be near as risky as, say, investing in a stock market that drops 80% over 2 years (nasdaq). My real estate investments were in resort areas in NC (not in California) that I felt, after researching the market, had a lot of upside (turns out I was right ). My "small business" happened to be a CPA practice that I was able to sell at retirement and generate another few hundred thousand dollars. If I had relied soley on the stock market, I would still be working today, instead I'm living in a nice, paid for, oceanfront condo in Cocoa Beach and enjoying life !

I'm pretty sure that we can agree to disagree on this subject and that is fine. The main thing is that the author of this thread and other "young dreamers" see that there are different ways to achieve there goals and let them decide for themselves.

[Hyperborea]

Hyperborea, I sure wish I knew how to put in quotes like you

Hit the quote button on the upper right of the message that you are responding to and then trim the quote down.

But for the record we DID retire at 36 years, 2 months for me, 35 for my wife, using this strategy

Right, I believe you and I'm not disputing the fact that you did. *However, the reasoning is post hoc. *You've done well to get where you are but just because you succeeded with it and made it through the very large number of business failures (again only ~ 1 in 6 businesses survive 5 years) doesn't mean that it is a highly likely scenario. *If you take 6 potential early retirees and have them set up a business only 1 in 6 of them will still be in that business in 5 years. *Will that 1 survivor be able to reitre then? *How many businesses are returning that kind of money?

Anecdotally, watching the family, friends, friends of family, etc. that have started businesses and my own forrays confirm those statistics. *For those that have done well none of them have generated millions in 6 years. *Even those that have gone on to make millions took a decade or more. *Much of whether they made those millions depended on some chance conditions and they admit so themselves. *Many of the businesses that survived the 5 years sputtered on paying an ok salary equivalent, some tax deductions, and a bit of flexible working hours but no fabulous wealth.

If we took 100 would-be market timers and let them go then after 6 years we might have a couple who've done remarkable well. *They could also claim that market timing is highly profitable safe and has only upside. *These are generally the folks posting about their great market timing skill on web boards (such as The Motley Fool) while the others are silent on the matter of their lack of "skill".

I'm pretty sure that we can agree to disagree on this subject and that is fine. The main thing is that the author of this thread and other "young dreamers" see that there are different ways to achieve there goals and let them decide for themselves.

Sure, they should consider all the information for themselves and then decide how lucky they are.

[Beachbumz]

Hit the quote button on the upper right of the message that you are responding to and then trim the quote down.

Thank you

[Beachbumz]

Hyperborea,
I think it was the statement "IF YOU'VE RETIRED....." that caused me to believe that you maybe doubted my statement, mostly the IF part.

I also find interesting your new subject line, "RE: Six years to millions is speculative". I couldn't agree more with that comment! I just wonder how you came up with it . I thought this whole board was about the fact that you DON'T have to have millions to retire early. I never said I had millions, because I don't (wish I did though ). I just have enough to retire at 36 and live comfortably, at least according to FireCalc (which was well worth the beer money )

And then there's your comments about small business. Once again, I never said anything about making a huge salary. I just made a nice living (along with my wife's paycheck) working with HUNDREDS of small businesses over the last 15 years. I'm sorry that the fact that You (if I understood your comment correctly) were unsuccessful in business has left such a sour taste in your mouth about it. However, I personally know hundreds of people that have been successful at making a nice living working for themselves, so it can be done. I don't know where you got your 1 out of 6 number (I'm not disputing it, I have heard 2 out of 3 fail in the first 3 years) for business failures, but I do know that the biggest reason is undercapitalization. I would hope people smart enough to contemplate early retirement would not fall into that trap.

Also, as I have said, I made my money with real estate, working for myself did have a lot of perks, but only gave me a salary maybe double what I would have made working for someone else. It did however give me an extra 300K to pad our retirement funds when I sold it. We would still have had enough, though, without the business.

I think it is ashame that you consider what I did "Lucky". There was virtually no risk of loss on the property I purchased and the rents were practically guaranteed. I was fortunate in the fact that the property appreciated at a rate higher than I anticipated. It does not take luck to be a successful real estate investor, it takes knowledge and a bit of hard work.

I must say that, IMHO, you will be the lucky one (and I hope you are) if you are successful in achieving early retirement if you are relying on only one asset class (stocks and bonds) and using only your money to do it. Let's just HOPE that another major bear market doesn't occur right before you get ready to call it quits.

[Nords]

... the "luckier" we get.

[Beachbumz]

agreed!

[Hyperborea]

Hyperborea,
I think it was the statement "IF YOU'VE RETIRED....." that caused me to believe that you maybe doubted my statement, mostly the IF part.

I believe that I said "If you can find a way to do so and do it successfully". The problem with message board communication is that the specific and the generic can get intertwined. Perhaps I should have used "one" instead of "you".

I also find interesting your new subject line, "RE: Six years to millions is speculative". I couldn't agree more with that comment! I just wonder how you came up with it *.

The generation of a million dollars or more profit for a small investor (in real estate or elsewhere) over 6 years or less is specualation and not investment.

I thought this whole board was about the fact that you DON'T have to have millions to retire early.

Actually, how much is really more a factor of how you wish to live. The minimum "recommended" amount is $1 million per $40K of income desired.

I'm sorry that the fact that You (if I understood your comment correctly) were unsuccessful in business has left such a sour taste in your mouth about it.

No sour taste at all. Instead, experience that came from trying to turn a nice little extra cash sideline of contract software into a larger business has made me realize how truly difficult it is. I made out ok but I could have done just about as well working for someone else and in the end I did. Too many hours selling the services, giving free seminars, specing jobs, etc. that by the end of it my hourly rate was not as good as working for others.

However, I personally know hundreds of people that have been successful at making a nice living working for themselves, so it can be done. I don't know where you got your 1 out of 6 number (I'm not disputing it, I have heard 2 out of 3 fail in the first 3 years)

Again not disputing that some do succeed but it is not the slam dunk key to FIRE in 6 years. I'd have to dig but IIRC the numbers came from one of the small business agencies of the government. Our numbers are consistent if you turn them into the same direction - i.e. 2 out of 3 fail in 3 years and 5 out of 6 fail in 6 years. Now, a number of those who fail sooner or later succeed but it's often on the 3rd or 4th try - definitely a lot longer than 6 years and most not striking the mother lode but just a nice income maybe doing something they like.

Also, as I have said, I made my money with real estate, working for myself did have a lot of perks, but only gave me a salary maybe double what I would have made working for someone else. It did however give me an extra 300K to pad our retirement funds when I sold it. We would still have had enough, though, without the business.

So, it's easy to make enough to FIRE using real estate in 6 years no matter where you are and no matter what the RE markets do? Anybody can do it? Not a chance of failure?

I think it is ashame that you consider what I did "Lucky". There was virtually no risk of loss on the property I purchased and the rents were practically guaranteed. I was fortunate in the fact that the property appreciated at a rate higher than I anticipated. It does not take luck to be a successful real estate investor, it takes knowledge and a bit of hard work.

Hmmm, what about the folks who live in areas where property values have gone down? They do go down you know.

I've got some friends of the family who've owned rentals before and while it did help their finances it was work, it was no slam dunk, and it certainly didn't bring in mega-bucks in 6 years. Or are we talking about much more speculative stuff with a lot more financial hanky panky involved?

I must say that, IMHO, you will be the lucky one (and I hope you are) if you are successful in achieving early retirement if you are relying on only one asset class (stocks and bonds) and using only your money to do it.

I've never heard bonds and stocks referred to as a single asset class before. Besides I am quite a bit more diversified than just "stocks". Now real estate - that's a single asset class.

Besides for most really early retirements the savings rate is a bigger factor than the return rate. You don't have a lot of time (6 years or 9 years) to get realistic returns without taking speculative risks.

Let's just HOPE that another major bear market doesn't occur right before you get ready to call it quits.

I don't bother with "HOPE". I diversify my portfolio and felt only small decreases in 2000 and have had some good returns due to that diversification over the last few years. Anybody who puts it all into NASDAQ and suffers an 80% decline as you suggest was foolish. It's kind of like putting all their money into real estate in a single market and hoping that the housing bubble doesn't burst before they cash out.

[Hyperborea]

... the "luckier" we get.

Yeah, kind of. We only get those chances at luck if we work hard. It's a necessary condition but it isn't sufficient. There are lots of hard workers who don't get the lucky break. The hard worker who doesn't get that lucky break doesn't usually lose but they don't win the jackpot without the luck too.

[Beachbumz]

If you've retired "super-early" with such a high-risk leveraging strategy then you've probably worked hard and are to be congratulated on your good fortune.

This was the "IF" I was referring too!!!

As far as everything else you said, I'd love to see where I said anything was ever a slam dunk. But basically I don't have the time or energy to waste debating with you on this anymore. The bottom line is I DID achieve enough net worth to retire (it took approx 7 years) doing it my way (at age 36) and you HOPE to achieve early retirement doing it your way and I wish you the best of luck.

I was able to ER at a young age, mostly due to having good luck, and taking advantage of rare opportunities. Having said that, prior to ER I worked very hard and spent 15 years setting myself up to be in 'lucky' situations.

I expect that many who ERed in 1998-2001 timeframe had the rare fortune of a red hot economy, booming stock market, booming realestate market, and private companies with no revenue selling for millions.

I don't expect to see those times again. I don't think people who followed my plan (or others') will do as well.

If I started 15 years later, I think I'd still be working.

[unclemick]

Hard work sucks, never heard of ER until I found this forum(VIA REHP), and was vaguely aware of the art of 'cheap b#%^ard courtesy Depression Era parents, Mother Earth News, etc, etc.

Beware the data point of one, but:

1966-1992 grunt engineer salary 8k - 61k.

Plunka, plunka - DCA, tax deferred, mostly Ben Graham - 50/50 S&P/GIC's. On the side - real estate, gold mine, timberland, part time work(tax prep), multi asset investing, a few spec stocks.

1993, age 49 - got layed off, girlfreind still worked - together 300- 350k pooled financial assets(paid up fish camp). 1994 she chucked her job.

Living on less than 20k per year was easy - my personal all time best was 12k in one year. She says I WILL never try that again (frying pan with my name on it).

Long story - but plunka, plunka DCA was 80-90% of our ER. All that other stuff(excluding house) was maybe 10%. Boring as watching oil based paint dry. There was a minor stock flat from 1966 - 1982 in the period. Wasn't near as exciting as Ben Graham's example of DCA from 1929 - 1949 if you consider the Depression and WWII historically interesting.

I have an observation about "start ups". It is true that
the failure rate is quite high (I won't go into the reasons for this here). You are better off buying a going business even if it is not doing too well. Often you
can find a seller who will finance you, and maybe a business which can be liquidated for a big profit.
People who found small businesses are reluctant to do this (liquidate) as they have too much emotional
investment. You, as a buyer only are looking at
the dollars. That alone can make the difference.

I also posted before that I would never see a million
dollar net worth, nor even half a million. Both true but
I was close pre-divorce. Ex. got half, which was fair.
Best investment I ever made possibly

John Galt