How to Retire early and FAST?

[saverspender]

Hi all,
Like all newbies, I have been a lurker for a while here and feel we are late in the saving game.  I'm 36, my hubby 39.  We have two beautiful kids 10 and 4.  Well, I finally got the courage to ask...and my main question is, how do we make money fast?   
About us:  we have around $110K in combined 401K accounts.
Real Estate:  still owe $500K on the 1st home, second home generates positive cash flow and we still owe $340K on it.  In the process of getting another home for investment purposes. Our real estate net worth is about $355K.
I still work. Hubby stays home with PT work.
So...what can we do to get things moving faster? We have started buying real estate for investment purposes BUT we are pretty cautious as there are lots of talk about bubble.  I am looking into landlording in lower cost areas since I find them (Tx, Ga) still affordable but it's far from us.  Do we still have a chance of retiring early?  Target age: 45-48. Any ideas?

 

[REWahoo]

Real Estate: still owe $500K on the 1st home, second home generates positive cash flow and we still owe $340K on it. In the process of getting another home for investment purposes.

SS, my initial reaction to your post (I'll not comment on the "how do we make money fast" question) is that you just might have too many of your nest eggs in the real estate basket. IF there is a bubble and it bursts, you might wish you had diversified just a bit more into other areas.

REW

 

[maddythebeagle]

You consider investing more in your 401k and other investments. You have 10 years or so to put a big push in! 100k is a great base.

 

[Nords]

...and my main question is, how do we make money fast?   

Welcome to the board, SS!

After reading all the posts here for the last year, I think ERs in their 30s-40s fall into four categories of portfolios:
1.) Earned a six-figure salary with lots of bonus & stock-option money and saved most of it,
2.) Made a six- or seven-figure portfolio in tech stocks in the late '90s and raced out the exit in time, or
3.) Made a decent salary, saved most of it by living a very frugal life, and chose an ER with very low expenses as a perpetual traveler or in a very low-cost area (usually overseas), or
4.) Have a civil-service/military pension with paid healthcare, probably a dual-income couple.

All of those lifestyles have their risks & rewards...

ERs in their 50s tend to be steady savers with compounding on their side.

I could be wrong, but I know very few ERs with two kids (we have one). If you're planning on subsidizing their college costs (which is another thread all by itself) that could delay your ER.

I'd hesitate to buy real estate anywhere in this market unless I could get cash flow (good job!), a huge tenant population, and a significant discount to the neighborhood's value. You may have a rocky road ahead if the RE market crashes, but if you're sticking with it for the long term then it'll pay off (as it has for several other ERs).

Maybe you need to take another look at why you want to hurry the process along so quickly and what could eliminate the urgency. Impatience? Work environment? Career options? Some other issue?

 

[wabmester]

How about a quote from Warren Buffett? "The best investment you can have is in your own abilities or business." With passive investments, your yield is out of your control. If you want to retire fast, start a business, generate good cash flow, and then sell it.

 

[wildcat]

Dunno bout fast but the people slingin' some rock down the street seem to be doing well + recession proof occupation. Anyway agree with the Wab, that is the fastest way for lawful citizens. It is not the ideal route for a lot of people. It may be more difficult when you (and others in your case) have mouths to feed other than yours and/or if you have above avg compensation from a job. Starting your own business takes a certain type of person.

Potential ideas or ways -
Hubby works more and save entire check; any fam that could help out with kid sitting?

Work on negotiating a raise and bank the extra amount

What sort of allocation do you have in stocks...i.e. if you want to RE but you are sitting on the sidelines in no risk type stuff. So may need to update it according to goals/plans.

Otherwise it is save more aggressively and cut out expenses - cable?
Kid's expenditures? Eating out often will suck you dry.

Oh and your name suggests you have multiple personalities too?

I could be wrong, but I know very few ERs with two kids (we have one). If you're planning on subsidizing their college costs (which is another thread all by itself) that could delay your ER.

Agree with Nords

 

[Mr._johngalt]

How about a quote from Warren Buffett?  "The best investment you can have is in your own abilities or business."   With passive investments, your yield is out of your control.   If you want to retire fast, start a business, generate good cash flow, and then sell it.

That's kind of what I did, even though I had no ideas about retirement
when I went into it. BTW, it is normally much easier and more
likely profitable to buy an existing business (even one that is not
doing well) than to start from square one.

JG

 

[maddythebeagle]

"3.)  Made a decent salary, saved most of it by living a very frugal life, and chose an ER with very low expenses as a perpetual traveler or in a very low-cost area (usually overseas), or"

-I would go further. on the frugal part. I think at any income level. Living Below Your Means (LBYM) is a must since as people's incomes go up, their spending follows. I would recommend "the millionaire next door" as a starting point. I think it is a must read if you want to retire early. I think it also gives a great reflection on attitudes on wealth. I think it is possible to be quite "frugal" without giving up on your quality of life. I just think it takes some "reprogramming" and rethinking on consumerism.  

 

[wabmester]

BTW, it is normally much easier and more likely profitable to buy an existing business

True, but bootstrapping a business yourself usually requires less up-front capital, and doing all the start-up grunt work makes it easier to start the next one. It also makes it easier to evaluate businesses to buy later (which isn't easy if it's your first).

Another good one from Buffett's 2005 meeting: the best business people are generally those who started the youngest. I think that's true for a number of reasons. I started at 11 with my own paper route, and formed my first corporation at 20. I still get the itch occasionally, but I think I got most of it out of my system by 40.

 

[Nords]

Another good one from Buffett's 2005 meeting: the best business people are generally those who started the youngest.

That figures, coming from a guy who started his first lemonade stand when he was five years old...

 

[Mr._johngalt]

True, but bootstrapping a business yourself usually requires less up-front capital, and doing all the start-up grunt work makes it easier to start the next one.   It also makes it easier to evaluate businesses to buy later (which isn't easy if it's your first).

Another good one from Buffett's 2005 meeting: the best business people are generally those who started the youngest.   I think that's true for a number of reasons.   I started at 11 with my own paper route, and formed my first corporation at 20.   I still get the itch occasionally, but I think I got most of it out of my system by 40.

I don't agree with your "less up-front capital" comment. Existing businesses
can easily be bought with no OOP cash at all. Leveraged buyout with 100%
leverage. They are done all the time, especially attractive now with all that
loose money floating around.

JG

 

[Calgary_Girl]

Well, I finally got the courage to ask...and my main question is, how do we make money fast?   

Ah, the magic question.

Real estate always kind of scared me so DH and I have stayed away from this. We don't have time to put up with renters' B.S., etc. In addition to maximizing our retirement savings, we've recently gotten into the stock market and have been doing quite well. I personally love income trusts since they generate a large monthly cash flow which will help us get out of the rat race ASAP (they are paying between 7% and 16%/year).

 

[laurence]

I agree with those above who said start your own business. A friend of mine, younger than I, helped start a business (did the IT work, set up the web site, got some B to B going) and as his reward got 5% ownership. That translated into $8000 last year, but looks to be ten times that this year, and if the sell out, he could have half a mil in his lap.

Everybody is jealous, but the part they miss is he had ten ventures flop, he just kept trying.

 

[Mr._johngalt]

I agree with those above who said start your own business.  A friend of mine, younger than I, helped start a business (did the IT work, set up the web site, got some B to B going) and as his reward got 5% ownership.  That translated into $8000 last year, but looks to be ten times that this year, and if the sell out, he could have half a mil in his lap. 

Everybody is jealous, but the part they miss is he had ten ventures flop, he just kept trying.

I had a similar experience before I discovered real estate and the power of leverage. I started up 2 small corps. but only worked at them part time and they languished. Then, I got equity in 3 existing corps. in return for helping
grow them. One went broke, once I got fired, but the other sold
eventually to a bigger company. Unfortunately, I was long gone by then. Should have had my own full time business early on. Light bulb didn't switch
on until pretty late in life.

JG

 

[Mr._johngalt]

And another thing...........

To answer the question of who can actually retire early, it is my opinion
that virtually anyone with above average intelligence and creativity
can do it. You have to be motivated of course.

JG

 

[poyet]

Get rich slowly is the best advice. There's a turning point beyond which trying to go faster generally leads to steep losses.
Patrice.

 

[saverspender]

Thanks for the the replies!!! I appreciate all of them.

When I read your replies, I do wonder now why I want to retire early. This forum is a big influence, the desire keeps building everytime I come here and read your posts....I get envious...I want to relax too, enjoy life with my family without having to ask my boss that I need the days off. Of course I have to pay the price of being a "spender" ...we love yearly nice, expensive vacations and and nice "stuff". We made a lot of mistakes in our investments along the years which has made us more cautious in most of our ventures. But we are learning along the way. No more nice vacations until our second business generates income.
As far as books, The Millionaire's Next Door and the Richest Man in Babylon are my favorites. I just got the Four Pillars (tape version) but haven't finished it.
Regarding business, yes we have a family business (the second home) and get a good cashflow. Not only does it pay for the mortgage and more, but increases in equity as well. We are now starting a second business which will hopefully work.
College funds are in place, not a whole lot yet. Kids have 8-14 years before college. So we are still saving for them.

So with that... I should slow down a little bit. I just get too excited sometimes. I should concentrate on FI so I can RE and enjoy life at while I'm at it.

THANKS! I enjoy this forum very much!

SS

 

[TromboneAl]

A very rich man was asked how he was able to retire at 35. His response:

I bought some apples from a farmer for $5, cleaned them up, and sold them for $10.

I used that $10 to buy more apples, and sold them for $20.

Then my rich uncle died and left me 12 million dollars.

 

[yakers]

Nice choice of books! While it is simplistic I like The Richest Man in Babylon. IMHO its more important to have a good attatude about money than which fund or asset allocation to choose.

 

[Spanky]

Then my rich uncle died and left me 12 million dollars.

Hmmm. We should always be nice to our rich relatives.