The Awakening

My goal is to retire in 1500 days at age 43. I am writing this on January 1, 2013, so if all goes according to plan, I’ll sail off into the sunset of early retirement in February of 2017, just in time to celebrate my 15th wedding anniversary.

The three parts you are about to read are my manifesto. Part 1 details how I arrived at this blog. Part II discusses the way you need to think in order to retire early. Part III breaks out my financial situation and the goals of the blog.

I. The awakening

Sunrise in Kauai

Sunrise in Kauai

My life was good. I had a job that paid well. I had 2 good kids and a good wife. I had 2 decent cars in a middle class enclave with nice neighbors.

We were smart with our money. I maxed out my 401(k) every year and even saved beyond that. When housing was going gangbusters and before we had kids, my wife and I flipped houses. We would buy older, outdated homes and spruce them up. We would live in them for a couple years, therefore not incurring any taxes on our gains and make a nice profit.

We had kids; two beautiful girls. I planned to raise them as best I could and send them on their way.

I planned to retire in my 60s and and retreat to some warm weather state. My life was ordinary and very similar to most everyone else.

Right around 2010, I started reading the JD Roth. He attained early retirement by abandoning the ridiculous, debt intensive, consumerist lifestyle that most people seem to embrace. My journey had begun.

I started reading about other people with similar early retirement ideas. Mr. Money Muchtache, The Simple Dollar, Brave New Life and Early Retirement Extreme all started to open my eyes to another way. A better way. The common thread was that financial independence early in life isn’t a silly dream, but an easily attainable goal if you play your cards just a little differently. Not only did most of these folks attain early retirement, but they did it without huge sacrifice. These aren’t investment bankers making millions a year, just normal folks who figured out what is important and what is not much earlier in life than most.

I was hooked.  I was awakened. I was now suddenly aware of an alternate universe where people in their 30s and 40s are able to retire with just little lifestyle tweaks here and there. Again, I have to reiterate; no get-rich-quick schemes; just smart decisions along with intelligent saving and investing. Some people will call the tweaks a compromise or too much to give up. Those people are still asleep and haven’t yet come to appreciate what truly matters.

So, do you want to work until you’re 80 or be able to retire to a beach in Costa Rica when you’re 45? I enjoy my work, so I’m not sure. What I do know though is that I want the freedom to choose! By rejecting a consumerist lifestyle and putting in a little hard work, you can set yourself free from the Matrix to live life on your terms. What could be better?

This is it. You get one life and one shot. In 80 years, we’ll all be worm food. Make the most of your time and live it the best you possibly can. Evaluate your value system carefully and figure out what is most important to you. If you’re honest with yourself, you’ll come to the conclusion that experiences and family time trump an expensive car. Realizing this is your first step out of the Matrix.

Take the red pill and follow me.

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II. What really matters

Think about the happiest, most meaningful times in your life. I’ll give you a moment if you need it. Seriously, think about it for a day or a week or a month if necessary. Write these times down and then come back and read about mine.

OK, ready? Let’s get started. Here is my personal braindump:

  • I remember the holidays as a child. I remember my grandparents coming over on Thanksgiving and Christmas. We would all sit down for a wonderful, homemade dinner and enjoy everyone’s company.
  • I remember our family vacations. They weren’t extravagant affairs. Sometimes we’d go camping and sleep in tents or the back of our pickup truck. We’d swim during the day and have camp fires at night.
  • I remember the joy I felt in college when I worked my ass off and earned As in difficult classes like organic chemistry and calculus. I felt on top of the world when I graduated at the top of my class in a difficult major.
  • I remember meeting my wife for the first time. We argued about pro-wrestling. That may sound a bit strange, but we clicked.
  • I remember my first child being born. She came out purple and quickly changed to a normal color after she took her first breath.  She didn’t utter a sound, not a scream or a cry. She seemed to look around, wondering where the heck she was and what was going on.
  • I remember my second child being born. She came out, took a deep breath and started screaming. I remember thinking “How can something so tiny make such a loud sound?” She didn’t stop screaming for almost 45 minutes.
  • I remember all of the crazy things our kids have said:
    • Do caterpillars fart?
    • Does thunder have legs?
    • When I grow up, I want to be a banana! (uttered with great enthusiasm)
  • Have you ever been to Yosemite National Park in the spring? Standing in the mist of 3000’ high waterfalls will reboot your soul.
Bridalveil Fall at Yosemite

Bridalveil Fall at Yosemite

What is the common thread in all of the above experiences? None involve possessions or buying stuff.

Not only do materialistic pursuits not generate long term happiness, but they are actually detrimental. If you have to work long hours to support a material lifestyle, what are you giving up? Are you going to miss your child’s first little league hit because you’re putting in long hours at the office? No one ever said on their deathbed (except maybe Steve Jobs) “I wish I had worked more.”

If you disagree with all of this, stop reading now. This is the fundamental principle of this blog. If you think that you need expensive things to make yourself happy, reevaluate your life. I’ve seen people who buy things to fill an emotional void in their life. Is this you? Find a different way to fill that void.

 

III. The goal: $1,000,000 and no debt

What would it take for me to retire early? I did some number crunching and a whole ton of research. Here are the main points:

  • How much money do we need?: My wife and I wrote all of our expenses in a book. Every time we returned from shopping or paid a bill, we logged it (more on this in a future post). Based on our logs, we can live on $2000/month or $24,000/year. This is assuming no mortgage or other debt. However, for safety’s sake, I’m bumping this up a bit to $30,000.
  • No debt: Currently, all of our cars are paid off, but we still have a mortgage. This must be paid off. The exception I’ll make to this rule is a rental property that generates more money than its mortgage.
  • 4% rule: Now, how much money do I need to guarantee an income of $30,000/year? The 4% rule is a really good guideline and the one that I will stick to. Based on the 4% rule, I need about $800,000 to retire with no debt. However, I’d like very much to be able to help my children through college, so I’m going to bump the number up to $1,000,000. $1,000,000 is the magic number.


From here to $1,000,000
Here is my current financial status as of 1/1/2013:

  • Money in the stock market: $573,777
  • Money in Prosper.com and LendingClub.com (microlending): $5,760
  • Cash: $6,506

So, I currently have $586,043 and need to get to at least $1,000,000 and I’m giving myself 1500 days, or a little over 4 years. I’m going to assume a return of 10%. I’ll also be contributing $2,000/month towards my investments.

I fired up this little investment calendar and ran my numbers. Here is what I came up with:

goaltable

So, not quite $1,000,000, but close. I expect to be able to increase the amount I put in per month over time, so that will make up for the slight shortfall.

Possible challenges

  • Getting canned: Should I lose my job, I may have to use my savings to live on. I am a contractor and my current contract runs through the end of 2013.
  • Stock market taking a dump: If the US is attacked again or we have another economic meltdown, my portfolio will sink.


Possible upsides

  • Real estate: I’ll be jumping into the rental market soon and possibly even flipping more properties. From crunching the numbers, I feel that I can purchase rentals that will generate me significant income from the start. More on this later.
  • Stock market: The past four years have been pretty miserable. I do believe the next four will be better.
  • Side jobs: As a computer programmer, I often am able to get side jobs. Some come from friends, some come from Craigslist.org and some are jobs I create, such as writing smart phone apps. More on this in a different blog.


Where do we go from here?
Here is what I want to do with this blog:

  • I’ll break down my financial situation frequently. At the beginning of each quarter, I’ll tell you how I’m doing here. You’ll know if I’m making my goals or if I’m full of hot air.
  • I’ll tell you more about me. I’ve done pretty well so far, but have also made some stupid mistakes. I’ll be writing about both. You’ll know how I got to where I am now and also how I plan to get to retirement in 1500 days.
  • I’ll detail my investments. I have too much money in the stock market now, but will be branching out into rental properties shortly and detailing it all.
  • I’ll tell you about Lending Club and Prosper. I’ve become an online lender and have been doing pretty well at it. I really like both of these sites as income generators.
  • I’ll get on my soapbox frequently about rejecting consumerism. I see ridiculous things people do to waste money all the time. Learn from their stupidity. There is a better way.
  • I’ll tell you how to save money. From doing projects around the home yourself to smarter shopping, there are a lot of things that we can all do to help make our piggy bank a little happier every month.
  • I’ll give you examples of what not to do. Most of the people I know make bad decisions about money. I will give real-life examples of this, and tell you how I think they should be changed. The real millionaires are the ones next door.
  • I’ll give you examples of what works. I have had some good role models, too and I’ll be writing about their lessons.

So, I hope you learn something that makes your life better in some way. However, I also want to learn from you. Please contact me with any thoughts, your story, suggestions, comments. I’d love to hear from you!

Happy saving!

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67 Responses to The Awakening

  1. Bernie says:

    Awesome post. Your journey to enlightment happened much like mine, with a random read of “Get Rich Slowly” which I found about a year and a half ago. I only wish these types of blogs had been around when I was younger (I’m 49 now). I won’t be able to retire in my early 40’s, but 55 is very doable and my house will be nearly paid for. I look forward to following your progress and comparing results.

  2. 1500 says:

    Hi Bernie-

    Thank you for the kind comment!

    I think we all wish we had a reset button for at least some parts of our lives. No doubt, there I things I would change if I could.

    However, I prefer to look at my life and yours from a different perspective. In your case, 55 is still far better than the vast majority of people. In my little circle, I can think of folks in their 60s or 70s who still have mortgages with many years left to go. Most people never do wake up to what could be.

  3. Jen says:

    How exciting!!! I look forward to watching your progress! We are in a similar start point but haven’t made the decision to do this yet..

  4. 1500 says:

    Hi Jen, glad to have you here!

    I hope you end up taking the alternate path. It’s not just about being able to retire early, its about having a more fulfilling and meaningful life.

    I’d like to hear about your progress as well!

  5. Jef says:

    Mate, came across your blog the other day and definitely keen to keep tracking your journey, not sure how you’re going although I’m going to read through your entire back-catalog 🙂

    Love what you’re doing here & hope you don’t mind me poking around!

    Cheers from Sydney, Australia (down under)

    • 1500 says:

      Hey Jef and hello Australia! I’ve never been to your country, but look forward to visiting someday.

      Welcome to the blogosphere!

  6. Really enjoy reading your story – I can relate trying to get to the same outcome as you also with two kids. With that in mind, my question – how are you dealing with college savings? have your goals in this regard changed throughout the years in this journey?

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  9. John L. Piccard says:

    Just turned 54 and our net worth is $2.3 Million. My wife of 30 years and I started with nothing but college degrees, no inheritances or windfalls. Raised 2 daughters through college. Lived comfortably but well below our means. Saved and invested regularly (Aaah…the power of compounding). We enjoy our jobs right now but enjoy the freedom to retire at any time even more! Congratulations on your accomplishments to date and best wishes on your goals…it can be done!!!

    • 1500 says:

      Thank you and nice work yourself! 2.3 million with lots of time left to live is really great!

    • meiling says:

      I just made my decision to retire early, I had same net worth as yours, I didn’t like my current job,and exhaust burn out everyday, no life, so I am thinking why i need make more money, I never will be able to spend in my rest of life. after i read Carl’s post, I am thinking my decision is correct.

  10. Lashar Lavenue says:

    Very impressive, and I like what you say about “stuff”, and the best times we remember, spot on!
    It sounds like you are conservative by nature which is a good thing. On that point I think your 4% might be a little lofty considering the interest rates and many other lower ROR’s available today. I use 3.5% in my planning just to be sure my assets last until I am “worm food”. I had a financial planner once tell me I was being too hard on myself. In any case I wd start with 3.5-3.75% for the first couple of years then adjust for inflation from there. Just to be sure….. Good luck.

  11. Great job guys. I always love seeing it when one of our own gets featured on a big site like MSN touting the basics of the early retirement movement that so many of us are actively perusing. I love reading the write-ups that they do and how they make it seem like it’s such a novelty to find people who are out there saving like mad, dialing in on their FI numbers and killing it. Hopefully this article about you guys will help to wake up more people to our movement.

    We’re still young, 29 and with a net worth of $177k (http://www.bandofsavers.com/p/net-worth.html) but my spreadsheets estimate that I’ll be able to retire in another 10-12 years – pending nothing changes good or bad.

  12. Steve Silk says:

    I’m just wondering where you come up with figuring a return of 10%, as you stated above your investment calendar.
    I’m no financial whiz, but I am pretty tuned in to interest rates, corporate bonds, munis, stocks, etc. A 10% return is a pretty lofty goal, even having the best stock pickers managing your money. In fact, unless you get fairly lucky, the best investment managers would only tell you they are in the 5-8% return area depending on your risk tolerance.
    I do like your ideas of simplifying the important things in life — family, and spending quality time with them.

    • 1500 says:

      10% is ambitious, but I don’t think it’s that crazy either, especially with dividend reinvestments: http://thume.ca/indexView/# That number doesn’t include an inflation adjustment.

      • Alfred Horg says:

        I don’t think that 10% is ambitious at all. Like you, my net worth is modest, but I have been able to achieve a 25% return per year for the past ten years.

        I do not just say so, I have proven so on my blog where I publish the amounts that I have deposited into my IRA, the dates of my deposits, and how much my IRA is worth now:
        http://3yeardouble.blogspot.com
        Alfred Horg recently posted…TestingMy Profile

  13. Steve C says:

    A love your optimism and goal, but $1,000,000 may not be enough given that health care costs could eat approximately $350k of your nest egg over your lifetime and that figure may be conservative. If you’re not familiar with ‘Monte Carlo’ theory or not had a financial professional run through a few scenarios, I would highly recommend that you do before taking the plunge.

  14. Dave S says:

    What about health insurance ?

  15. John L. PIccard says:

    Good point about insurance. After 25 years at my current employer, Inam fortunate to get fully funded health insurance until I am
    Medicare eligible. But without that perhaps 1 Million may be cutting it close.

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  17. NANCY says:

    This is great.I am 50 years with very little to show that i have been in employment.
    I have a mortgage to service and 2 children in high school and 2 in the UNIVERSITY.
    My income is 1,000 dollars.Children’s fees is 560 dollars and the mortgage is 80 dollars.Already as you can see life is next to impossible.

    You might wonder how i ended up here.My husband had a job and we lived in a rented house.I thought it would be better to get a house through mortgage which at the end of the day would be our own.My husband then decided to get into politics where he spent a lot of our resources but did not make it.For three years life has been difficult.He has been in and out of hospital since then the last having been diagnosed with a mild stroke. I cant just make ends meet.

    It has been my desire to build a school as my retirement project since i just love kids and education.My dream as i can see is far from being realised as at now hence early retirement

  18. Eva says:

    I have been thinking about it but how do you compensate for lack of things that employer usually provides? I have health insurance, life insurance, long term disability insurance and other perks through my employer. My question may be dumb to an American but I was born in Europe and grew up there. Here it seems the only way to get those things is to stay employed till typical retirement age. I am going to hopefully have more kids – how can I do without great health insurance? Thanks for writing.

  19. Found your blog through yahoo article. Great stuff!

  20. Mary Berkshire says:

    Poor journalism at its worst. I am sorry, but when you start with nearly $600,000 as your initial savings/investment you are not portraying an accurate representation of “how to save $1,000,000 in four years.” You most likely achieved your milestone and $1M goal over a 20 year vesting cycle through computer programming, flipping homes, possible inheritance, and passive earnings. It’s great that you found a reporter to showcase your story, but let’s be real…and tell everyone how long it took both of you to save your first $570,000. That should be the crux of the story had you saved $570k in less than 4 years. I commend both of you for your success, but shame the media for portraying false representation and duping the public. But hey, there’s no such thing as bad press when it comes to free advertising. Cheers!

    • 1500 says:

      Mary-

      First and foremost, you’re absolutely correct. The title is pure clickbait and isn’t accurate. I had no control over it. With that said, the author does explain it all in the article. As you stated, it took almost 20 years to accomplish this, starting with $60,000 in student loan debt.

      Thanks for being nice about it instead of just saying “YOU SUCK!”

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  22. JP says:

    My wife and I (with 2 kids) are awakening to an idea like this at age 41. We have done well saving — net worth is right at $1M – with about $900k in cash and investments. The majority (~$500k) is in 401k’s and IRA’s though. It sounds like a lot of your initial saving was into similar vehicles. How are you tapping into these funds early (i.e. before age 59.5) without massive penalty?

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  25. Inigo says:

    Your story is inspiring and find that my wife have and I recently started talking in this way, just haven’t pulled it together enough to start. We’re low on actual savings, but between our 401ks (approx 600k) and home equity (another 500k) I think that changes to our lifestyle would definitly be able to crank up the savings. My question is around your investments…you mention that you have, or started with, approx 575k in stocks. Does that include 401Ks that you and your wife have or is it all actual stocks? Just wondering how the 401ks fit in. Along with many others, I too have turned to reevaluating my situation and have started thinking about ways to financial freedom. Thanks for the posts and good luck!

  26. Steve says:

    Your plan is sound. Your title is misleading. It reminds me of the old joke: “I can tell you how to make a million dollars. First, you start with $900,000…” You started with $570,000 according to what I read on MSN. I’m starting with about half that. I won’t be able to retire until I’m about the 62 you mentioned – which for me is in 2 years. I don’t need to have a million dollars to retire on as long as I get help from Social Security. And my computer programmer salary is allowing me to save over $3,000 per month because I live frugally, like you do.

  27. Lace says:

    Hi,
    I’ve enjoyed reading your blog, and even put together my own spreadsheets with data analysis on our future retirement, investments, savings, expenses, etc. But, what I want to know is within your $2000/ month expense budget, do you allow for any “fun” items, and if so, what percentage of your monthly expense budget is allocated to “fun”?

    For my husband and I, we LOVE to travel. This year alone, we’ve been to India, Maldives, Ireland, South Africa, and thinking about Paris this fall. This doesn’t include our domestic trips. Granted, we could scale that back and travel more frugally (though we already do travel pretty frugally – paying for tickets with miles, no fancy hotels, etc., and that is how we’re able to afford so many trips). But I’m trying to figure out how to make this travel work (or any other type of “fun”) in a more limited budget. Because to us, there is no point in racing to retirement at 45 years old, disregarding all refreshment stands along the way, only to get hit by a speeding bus at 44, and never getting to enjoy our retirement.

    Curious to hear how you manage this! Thanks!

    • have you considered looking into points and miles to make this affordable? I am on the same boat as you – I am working towards early retirement (10-12 years from now) but in the meantime travel a lot NOW. I have examples on my blog of trips we have done with miles and points to significantly reduce expenses…I also recommend some resuorces on my page that talk specifically about that part of the puzzle which are already very well documented (like the points guy and million mile secrets, etc).

  28. Andrew Ulibarri says:

    I really love the blog and can relate as my wife and I have taken the same journey. I’m 53 and if I were to be let go from my job, we’d be ok. We did start the journey early so time was on our side. What I would like more information on is the cost of health care. How do you plan on providing health care and have the same annual income Thank you.

  29. Bob B. says:

    You know, we’ve accumulated $1.3m, and no debt – I’ll retire and start social security next month (age 62)…. and I still worry about having enough to maintain a modest life style. Thanks for your article!

    • 1500 says:

      Nice work Bob! I worry a lot too. In the end, I have a feeling that both of us are going to look back and realize that worrying was a waste of time.

    • Lashar says:

      BB, Assuming you have your 1.3mm in some sort of stock index fund (I prefer S&P 500), and leave it there long term, ignoring market fluctuations, you can take out $4100/mo and you’ll be fine for a long long time. Couple that with your SS and you’ll be even better.

  30. Cliff says:

    Good post.
    One question, what percentage does your 401K weigh in your total net worth?

  31. Theos says:

    You did a very good job. Is this possible in poorest countries where security, market. .. are not stable! ?

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  34. Paulo says:

    The title is pure clickbait and isn’t accurate. This is correct. Shortly, you can retire with $1,000,000 at any age. If you’re a couple at 38, working now and holding almost $600,000 in advance, you can do it in 4 years or less. But beware that $1,000,000 isn’t that much at 43. You’ll depend on interest rates, which are 0.25% now in Europe, for instance, and on inflation, something you can’t control. I appreciate this couple’s nerve and decision, but… The title is pure clickbait and isn’t accurate.

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  39. Tom says:

    Congrats on being focused. I am in the financial business and one item I believe you have overlooked in your planning process is the cost of health care. Have you looked at the minimum income needed to qualify for the taxpayer subsidy? If below you either pay full cost which can be over $300 per person for coverage or you go to Medicaid. Thanks

    • 1500 says:

      Hi Tom-

      We were on the ACA last year (fully unsubsidized version) and that’s what we’ll do when my wife and I are both without jobs.

      I think the minimum income to get above Medicaid is about $32,000 for a family of 4. I don’t want to be on Medicaid (I feel like I should be paying something), but I don’t think it will be an issue since we’ll have income from investments coming in. This is definitely a concern though.

  40. Joanna says:

    Loved your story! I’m a 42 year old single mom with a 1.5 million portfolio. Some days I like my job, but mostly the coworkers make it miserable. Our jobs are physically demanding, & the strongest personalities (definitely not me!) always get the easier jobs. Even though they are twice my size & I have more seniority. I want to do what you did, but am hesitant to take the plunge. Through the job, I have the best health insurance. I need the insurance because I started getting really bad migraines which are becoming more frequent & painful.

    • Chelsea Yuan says:

      Your body is telling you that you need to slow down, lack of certain nutrition in your body. I learned and have been taking something like EHT. It gives whole day energy and focus, better sleep

  41. Chelsea Yuan says:

    Great to know someone actually control their expenses and be able to cut them down. One major component is missing from your retirement profile is life insurance. If a major illness occurs, medical insurance is not enough to cover all expenses. Tax and inflation are also eating up your income. You may look into the income tax free, life time income plus living benefits policy. Principal is protected, no penny loss, upside potential and downside protection to money accumulation. Yes, I am licensed insurance broker. I have 2 of these on myself.

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  43. Katherine says:

    Very inspiring! Keep your tips coming.

  44. MA says:

    GREAT READ! I’m actually 9 months away from retirement at 56. Looking at a paid off House in a 55+ community (14 K to go) AND $700K AND a $2,500 month Pension from the State at age 60. I also qualify for free Healthcare coverage at age 60 via the State. By the way, I’ve lived the dream over the past 30 years in that I have traveled to 50+ countries (some multiple times) and relish experiences over materialism. The only drawback is that the wife needs to remain working for the next 3 1/2 years in order to allow myself to access to healthcare. Lastly, since I get bored easily, I am looking at working for a CPA firm exclusively during tax season and using that money to finance my annual fixed expenses. 🙂

  45. Greg Z says:

    Nice work you two! Our paths are very similar. Our goal of $1 million should happen by 45 through hardwork and determination. Here is why I really like your blog, as a fellow married person, it is absolutely key that the two of us are on the same page and that we both understand our end goal financially. If we both have the same understanding, there isn’t a struggle between us about why we are not going out to eat tonight or why we prefer to buy items second-hand instead of new. Thanks for the blog and helping my wife and I stay on track.

  46. Jos van Doorn says:

    Can I subscribe to your blog?

  47. Grace says:

    I want to live a debt free lifestyle. First after reading this I realized I am in the matrix. I am not saving anything being on leave from work on child care without pay. Collecting workers compensation less than $1200 a month. I need down size big time increasing my retirement portfolio. And $46000 in debt at 37. Terrible for a single mother with a 22 month child. Only zero in emergency nest and $1300 in checking. I need resolution. Assets only 20,000 in TRS and TDA funds. Owe $13,120 in retirement loan earning 7% interest. That going in default! In need of serious financial help.
    Go figure ! Decided go back to school through vesid program and change career paths from 25 years educator. To nursing and hoping for positive change. I need change my mind set for my sons future. I want to retire young to enjoy watching him grow. Credit score is good but in need of better savings plan. In need of damage control! Any suggestions????

  48. SANKETKUMAR says:

    Its really great article. Really helpful for making very simple retirement plan. I have question. He counter interest rate which seems really high. I need to know how can i get that much interest rate on $120,000. I have only debt for my new car and I don’t have house yet. I will buy house with my investment but I want to keep half of my investment money in stock too. Please let me know what should i do to make $500,000 by the end of 2020. I am small business owner too. I have invested money in retail business as well.

    Please guide me further.

  49. Finatrak says:

    In the current economy and forecast: $1M seems low to retire. ~$1.8M seems to be a more reasonable goal.
    Inflation: 3%, Children’s education(2): 200K, Health risks (50K), Stock market fluctuations (50K), Geographical region (100K) are swaying the numbers a lot.

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