Discussions around here have focused on early retirement and financial independence with a few assumptions: either you own income properties, own a business, or have a side hustle. But what about the other 95% of the people working their tail off, day in and day out, looking for a retirement plan? For those fine folks I have a treat today. We will focus on normal people and wealth accumulation. We will avoid tax talk because income level and type of income create too many variables muddying the conversation.
You would think it should be simple if you are a wage earner only, but it’s not. There are several choices you need to make to maximize your wealthy building. Accelerating to the early retirement line is straight forward if you know where to start. Without passive income like rental properties you only have your earned income (wages) to rely on. Your passive income will be limited to dividends, interest and capital gains.
Building an Empire
There are two parts to living the Financial Independence (FI) lifestyle: the building phase and the maintaining phase. During the building phase you save like crazy. My recommendation is to save half of what you earn. It is more important than ever to have a high savings rate if you don’t own rental properties or have a side hustle. It will take 16-17 years to reach FI at a 50% savings rate assuming a 5% growth rate and a 4% withdrawal rate once retired.