Ideas in the Wild: Jeff Johnson Shows That We Just Need One Decade to Set Ourselves Up for Retirement
A bookkeeper with a two-year college degree retires with more than $5 million in his investment accounts. A renowned surgeon is shocked to discover that he doesn’t have enough to retire.
Based on real people, the two stories in Jeff Johnson’s new book One Decade to Make Millions prove that anyone that saves and invests early in life can retire wealthy and anyone can go be short of resources at retirement. The only question is how much attention we decide to pay to our finances — and when we decide to start.
Those who start saving in their early twenties and apply a few basic principles to their personal finances set themselves up well for retirement. Maybe even early retirement. With fewer financial worries for the rest of their life. On the other hand, if we spend money as fast as we make it, even a million-dollar salary won’t get us where we need to go.
So if we want to retire early with the possibility of a multimillion-dollar nest egg, we don’t need a medical degree. In fact, Jeff says we need to just get started in one decade, your twenties. I recently caught up with Jeff to learn more about why he wrote the book and the ideas he shares with his readers.
Why did you write this book?
If you are a recent or soon-to-be graduate from high school or college, I wrote this book for you. The perfect time to learn financial skills is when you are just starting to earn an income from employment. This is the best time in your life to start putting intentional money habits to work in your life right away. This book is not intended to be a detailed deep dive into the financial world. It’s about getting started building a foundation for future financial wellness now, when time is on your side.
However, if you prefer to live large right now, you’re likely thinking you can save for your child’s education, a dream home, or retirement later in life. This mindset is not uncommon today in America. Hey, if that’s your choice, I can help you start your Plan B thinking. But keep in mind that saving in your twenties has the powerful impact on your life savings. I am here to help you with whichever you decide.
What’s an idea you share that really excites you?
I developed the Five Financial Foundations over my career as a financial professional. The Five Financial Foundations are simple, making this approach to building your financial future especially useful. Anyone who really wants a bigger and better financial future can start with these critical guidelines. Below is an overview (with more details found in the book).
1. Save some amount of money every time you get paid.
If you are able, try an initial target savings rate of 10 percent of your earnings. If you are just getting started, a lesser percentage is acceptable — any savings will do. The most important factor is to begin the habit of saving money every time you get paid. Build your “savings muscles” in the same way you build physical strength.
2. Always have a cash reserve for emergencies and larger consumer goods purchases, such as a car or furnishings, to avoid borrowing money and paying interest.
This amount can vary depending on a person’s situation, but an initial target is a minimum of one to two months’ living expenses. Later in life, it’s ideal to have a full year’s living expenses held in reserve.
3. Take full advantage of tax-favored investment accounts, such as your employer’s retirement savings plan, an IRA, or a Roth IRA.
Learn about these long-term savings vehicles through which most successful people build their largest pools of wealth. Start early in life, put money into growth investments, and let the money work for you!
4. If you decide to own a home, the purchase price should be no more than twice to two and a half times your annual household income.
Save and accumulate at least 20 percent of the home purchase price for a down payment, and finance the balance with a long-term fixed-rate mortgage. Unless it’s really necessary, consider renting rather than buying a home until you have accumulated some savings and investments.
5. Avoid consumer debt, which is considered “bad debt.”
Bad debt is high-interest, not tax-deductible, and used to pay for things of no value or declining value, such as expensive cars, clothes and accessories, entertainment, and vacations. This is not to say you shouldn’t have any of these things — it’s just that you should pay cash and not borrow for them.
How will following your advice/suggestions improve your readers’ lives?/How will implementing your idea improve your readers’ lives?
The Five Financial Foundations are pretty simple, but not always easy to implement. Living by these foundations often requires denying yourself some material items you think you need and creating new, healthy money management habits instead. Convince yourself that some things are a temporary want — if it is something you can forgo, save that money.
Saving money is simpler than it might seem to some. The basis is to spend less than you earn, or find a way to earn more than you spend. This information is nothing new. It’s old and timeless wisdom.
The beauty of getting started early is that it affords you more choices later in life. You want to have more money, of course, but the importance of money is not about being rich financially — it’s about having a wealthy lifestyle that’s right for you.
The stories in this book are true, with names and some details altered to respect the privacy and confidentiality of personal information. These stories are provided for general information and educational purposes. There are instances throughout the book where the author may present a hypothetical case study regarding client returns or the growth of a portfolio over time. These cases are for illustrative purposes only, rely on several underlying and implied assumptions and should not be considered as a demonstration of actual performance results. Past performance is no guarantee of future results.
