Jaspreet Singh is a top money expert for a reason. He’s successfully built several companies, one of which is an investing education app. He’s also the CEO of Briefs Media, an attorney, an investor and the creator of the well-known YouTube channel, “The Minority Mindset.”
In a Lewis Howes podcast, Singh recently spoke about the five steps to retiring early. Each of these steps builds on the previous one, giving you a comprehensive look into the methodology behind them, while setting you up for financial success.
While it’s important to remember that there’s no one-size-fits-all approach to personal finance or preparing for retirement, Singh’s advice can help you get started. With that in mind, here are his five steps to retiring early, as well as related financial tips to help you along the way.
Know How To Spend Your Money Properly
In a Q&A with GOBankingRates, Singh said, “The one piece of money advice I wish everyone would know is make yourself rich before you make everyone else around you rich.”
A lot of people go out and buy luxury brand apparel or other goods, Singh said. While this can make you look or even feel rich, the truth is that your hard-earned money is going into the company’s pockets — and their shareholders’. In other words, you’re making others rich rather than yourself.
Instead, Singh recommends spending your money on investments first. Once those investments see a high enough return and you can easily afford the higher price tag, you can purchase things from those brands.
Singh also suggested that people follow the 75/15/10 rule. The idea is that you’ll spend 75% of your income on direct living expenses, which can include fixed and variable payments. You’ll then invest 15% in things like mutual funds, stocks and other assets. The final 10% goes toward savings.
Learn How To Grow Your Money Properly
Knowing how to grow your money can be a challenge, but it’s a vital part of becoming wealthy and retiring early. Singh commented that many Americans fail to become wealthy because they spend most of their money on nice things rather than saving or investing it. Not only does this require people to work harder or more hours to afford a higher-end lifestyle, but it also doesn’t help them grow their cash.
This is where investing comes into play. In the podcast, Singh noted that there are many things you can invest in, ranging from stocks to real estate to your own education. If you come into a sudden cash windfall for instance, don’t immediately start planning your next vacation. Instead put that money into an asset or account that earns dividends or compound interest and can grow over time.
If you’re just starting out, you can always invest some of your money in an IRA or 401(k). These accounts are more accessible than other assets, which is useful if you need the money. You’ll still need other investments to prepare for retirement, though.
For a more passive solution, you can set it up where a certain portion of your paycheck goes directly into an investment account. This process can be slow, but it also can potentially earn you a lot of money over time.
Find Ways To Save Your Money Properly
In the podcast, Singh noted that money in savings can help with achieving an early retirement. It also can protect you against financial emergencies. That’s why it may be a good idea to set aside 10% of your monthly income in a high-yield savings account. Once you have $1,000 in savings, you can use it to create a passive income stream or invest in index funds.
Singh did provide a word of caution about only saving money in a bank account though. Not only are interest rates generally low, but the accessibility of the account makes it all too easy to use the money you’ve set aside.
Know How To Earn More Money the Right Way
The next step, according to Singh, is to increase the amount of money you earn. Doing this also makes it easier to save and invest more, which can help you build toward an early retirement.
One way to earn more money is to work hard and put in more hours, but it’s important to combine this method with working smart. This means familiarizing yourself with the current economic and financial system and finding ways to benefit from that. It might also mean asking for a raise or promotion at work. Or it could mean taking on a secondary job or side hustle for a while — at least until you’re on track with your financial goals.
Singh also noted that it’s important to be willing to fail. This is because failure happens, no matter how prepared you are. By being prepared, you’re positioning yourself to be able to handle failure and move forward.
Understand How To Protect Your Money
Once you have these systems in place, the final tip to retiring early is to focus on protecting your money and assets. People lose money in many ways, such as by overspending or even through taxes.
When it comes to taxes, it’s also wise to familiarize yourself with the current tax codes. If that’s too time-consuming, you can hire someone — like a CPA or tax professional — to deal with it for you. This is important because earned income isn’t always treated the same. The money you earn from your W-2 job, for example, is likely to be hit by a higher tax rate and have fewer restrictions. However, the money earned through investments may have fewer taxes or come with certain tax benefits.
You also might want to consider having legal protection, especially if you’re establishing your own business. For instance, you could get an LLC and insurance. That way if something happens — such as if you face a lawsuit down the line — it’ll be your business that gets sued, not you.
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