More and more, I’m meeting people who want to know how to retire early. There’s been a lot of buzz in the media lately about early retirement, and that’s led folks to wonder how much money they would need to quit their jobs — or if early retirement is even something they should consider.

Why retire early? Well, for most people a job is a necessary evil. We work because we have to. Early retirement gives us the flexibility to choose how we spend our time, whether that entails sitting on the beach drinking margaritas or it leads to new work that provides meaning and fulfillment.

Lots of us dream of leaving the workplace in our forties or fifties instead of sticking it out until age 65 — but we keep working to support the lifestyles to which we’ve become accustomed. We like our iPhones and Playstations and Priuses, so we surrender to the idea that we’ll have fifty-year careers.

Still, there are a surprising number of folks who manage to retire young. In fact, the 2018 EBRI Retirement Confidence Survey found that 35% of retirees left the workforce before they turned 60. (Previous surveys have shown that 18% of people retire by age 55.)

These folks aren’t lucky lottery winners, and most didn’t have high-paying careers. In general, those who manage to retire early have opted to live with less when they’re younger so they can obtain financial freedom before they’re too old to enjoy it.

Early retirement is a fantastic goal, but it can be tough to achieve. Three major obstacles stand in your way:

• You have less time to earn money. If you start working at 20 and retire at 65, you have 45 income-producing years. But if you retire at 45, you only have 25 income-producing years.
• You spend more time living on your savings. Life expectancy for the average American is nearly 80 years. If you retire at 65, your savings will probably have to last only ten to twenty years; if you retire at 45, your savings may need to support you for thirty or forty years.
• You don’t enjoy traditional retirement benefits. If you retire young, you can’t access Social Security or Medicare for several years — or decades. You also face penalties if you choose to access your retirement accounts before you reaching minimum age requirements. (I’m experiencing issues with this gap already!)

In short, early retirees have less time to make money, and that money has to last them longer. Even if you stay healthy and the economy cooperates, that’s asking a lot.

That’s not to say you shouldn’t plan to retire early — it’s a laudable goal, one that I encourage here at Get Rich Slowly — but if you’re serious about doing so, you need to be diligent. You need to have a plan. And you need to understand the numbers.

Let’s take a look at the basics of how to retire early — and why you might want to do so.

Why Retire Early?

Before we dive deep into the numbers, let’s get a little philosophical. Why would somebody want to retire early in the first place?

Honestly, the reasons people pursue this goal are many and varied. The answers are as individual as we are. However, I’ve noticed some common themes.

Reading the financial independence forum on Reddit, you might think that most people want to retire early because they’re trying to escape from something. They hate their jobs. They hate where they live. They hate their lives. And yes, there are plenty of people who are hoping early retirement will solve their problems. (Hot tip: It won’t.)

I believe people are much more successful (and happier) if instead of running from something, they run toward a goal instead. In the case of early retirement, that means being motivated by a carrot instead of a stick.

Don’t chase financial independence because you want out of a bad job. Chase it because you want to obtain something worthwhile. Here are a few of the many reasons people reach toward early retirement:

• Fun. Traditionally, people have wanted to retire early so that they can enjoy life. They think they’ll play golf or tennis. They think they’ll buy a beach house and go fishing every day. They think they’ll do whatever they want, whenever they want. (Fun can absolutely be a big part of early retirement, but most successful early retirees find they want more out of life.)

• Freedom. If you’re able to retire early, you have the freedom to pursue other passions. You can travel. You can volunteer. You can spend time with your family. You can even find work you were meant to instead of work you have to do. (Some folks argue that if you’re working at all, you’re not retired. They’re wrong.)
• Fulfillment. Many people — and I’m one of them — choose to retire early so that they can turn their attention to more fulfilling endeavors. What this means differs with each person. For some, fulfillment comes from being able to watch their children grow. For others, it comes from starting a business. And still others discover meaning in writing books, teaching classes, hiking across the country, and so on.

The bottom line is that the “why” doesn’t really matter — as long as you have one. From what I’ve seen, you’ll probably be happier (and more successful) if you’re working toward something rather than trying to escape something. But even escape can be a valid reason to retire early.

The Extraordinary Power of Saving

Here’s the fundamental thing you need to know about early retirement: The more you save, the sooner you can retire. Obvious, right? Maybe so, but just because it’s obvious doesn’t mean it’s easy.

Most financial advisers urge their clients to save around ten percent of their income for retirement. Bold advisers recommend saving as much as twenty percent. These numbers are safe. They’ll get you to retirement at age 65 without making many sacrifices along the way. The downside, however, is that by saving only ten or twenty percent of your income, you’re tacitly agreeing to spend forty or fifty years “working for the man”.

A growing number of people have realized that they don’t want to work for fifty years. They want to trade the commute, the co-workers, and the hassle for something more meaningful. These folks have crunched the numbers and seen that if they’re able to increase their saving rate, they can retire sooner.

Consider the following shockingly simple math:

• With a 10% saving rate, you’ll need to work 50 years before you’ve saved enough to retire. (If you start working at 21, you can be done by the time you’re 71.)
• With a 20% saving rate, you’ll need to work 37 years before you’ve saved enough to retire. (If you start working at 21, you can be done by the time you’re 58.)
• With a 35% saving rate, you’ll need to work 25 years before you’ve saved enough to retire. (If you start working at 21, you can be done by the time you’re 46.)
• With a 50% saving rate — if you save half of everything you earn — you’ll only need to work for 17 years before you’ve saved enough to retire. (If you save half your income from age 21, you can retire by the time you’re 38.)
• If you’re able to achieve a mind-boggling 70% saving rate — I know people who have done this! — you’ll have enough saved to retire in less than nine years. (If you managed to do this from age 21, you could retire by 30.)

I’ll be honest: I used to think numbers like this were crazy. I could barely save fifty bucks a month. How was I going to save half my income?

In the twelve years that I’ve been writing about money, I’ve come to understand that high saving rates aren’t crazy — they’re just rare. Over the years, I’ve talked with many people who purposefully seek high-paying jobs, find ways to slash costs, or (most often) do both. There are plenty of people who choose to forego the modern American lifestyle in order to achieve something more important.

My ex-wife, for instance, has always been a super saver, and is currently setting aside more than one-third of her income. She’s not a tech bro. She started her career as a schoolteacher, and now she’s a forensic chemist. She’ll retire in a few years at age 52. I know another fellow who set a goal to retire by 40 — and did so. And I’ve met a few dedicated souls who saved so much so quickly that they achieved financial independence by the time they turned thirty.

For more early retirement stories, check out this Life magazine article from 1957 about what early retirement was like sixty years ago.

How to Save Half Your Income

According to the 2016 edition of the Retirement Confident Survey, 22% of workers save one-fifth of their household income for retirement. Four percent of workers save at least half their income.

If you believed the doom and gloom in the mass media, you’d think saving half your income was impossible. It’s not. You probably know a dual-income couple who saves half what they earn (or close to it) by socking away one partner’s paycheck. They live on one income and save the other for the future.

When I was younger, for instance, two of my close friends got married. He worked as an accountant; she taught grade school. From the start, they lived on only his paycheck. This put them in an excellent financial position when they decided to have a family. She was able to quit to become a full-time mother. Meanwhile, their spending was already comfortably within the husbands income.

If you’d like to boost your saving rate — whether it’s to retire early or to obtain any other financial goal — I recommend a two-pronged attack.

First, minimize spending. Two expenses consume half of the average American budget. Pursue these first (and with greatest vigor).

The number one way to cut costs is to pay less for housing. The average American spends one-third of her budget on a place to live. But, as you’ve probably noticed, average Americans don’t retire early. I urge folks to spend no more than 25% of their income on housing — and less is better. Choose a home in an area with a low cost of living.

Reject the advice to “buy as much home as you can afford”. Buy as little as you need. Take out a small mortgage at a low interest rate. Repay it as quickly as possible. Lastly, don’t be afraid to rent. Despite what you’ve heard, renting is not throwing your money away. Often it’s a smart move!
Transportation is the second-largest expense for the average American. The more you can reduce your use of motor vehicles, the more money you’ll save. Choose to live in a walkable neighborhood. (Before moving to our current house, I walked for 80% of my errands, which provided added health benefits.) If possible, bike to work. Use public transportation. Reject the notion that your car is a status symbol. When you buy, choose a fuel-efficient used model and drive it until it’s dead.

Cutting costs on housing and transportation will have as much impact as everything else you do combined. Big wins are the cornerstone of financial freedom. Yes, it’s great to clip coupons, to grow a vegetable garden, to shop at thrift stores, and so on. But recognize that these actions net you pennies at a time while tackling the two biggest items in your budget could yield hundreds (or thousands!) of dollars in one blow.

Many folks frown on this sort of frugality. They view it as sacrifice. They feel like they’re depriving themselves. I disagree. Saving is not sacrifice. When I save for retirement, that money is still spent. But I’m choosing to spend it on freedom tomorrow instead of fun today.

The second piece of our two-pronged attack is perhaps most important: Maximize your income. It’s great to cut expenses and develop thrifty habits, but there’s only so much fat you can trim from your budget. In theory, there’s no limit to how much you can earn. If you want to retire early, you’ll probably want to make more money.

• Your job is your most important asset. Treat it as such. Negotiate your salary, learn new skills, connect with colleagues, and actively manage your career.
• Become better educated. In the U.S., education has a greater impact on lifetime earnings than any other demographic factor. Your age, race, gender, and location all influence what you earn, but nothing matters more than what you know.
• Sell your stuff. It’ll improve both your mental and financial health.
• Start a side gig. Make money from your hobby. Take a second job.

To be blunt, most people who read this article won’t do any of these things. They won’t look for a cheaper place to live, won’t find ways to drive less, won’t increase their income. They want easy, painless shortcuts, and that’s fine. But they can’t expect to have their cake and eat it too.

There are no easy, painless shortcuts to early retirement. If you want to quit working before you’re old, you must boost your saving rate. There are only two ways to do that: earn more or spend less. That’s the basic rule of personal finance.

However, a handful of readers will heed my advice. Maybe one of them is you!

You’ll make some big changes to create a high saving rate. You’ll learn how to invest wisely. You’ll build a wealth snowball that grows faster and faster as you add to it, one that also gains momentum through compounding.

What about debt? If you follow this roadmap, you don’t have to worry about it. Even if you start the journey owing money on college loans or credit cards, that debt will disappear. Debt reduction is a side effect of boosting your saving rate.

How to Retire Early

At some point, your wealth snowball will be so large that it can last the rest of your life. You’ll never have to work for money again unless you choose to. At this crossover point, your investment returns produce more than you spend.

Realistically speaking, it’s important to have a margin of safety. To that end, I make the following assumptions when I calculate whether somebody is ready to retire:

• You’ll spend as much in the future as you do now. (About 38% of people spend more, 21% spend less, and 38% spend the same.)
• If you withdraw about 4% from your savings each year, your wealth snowball will maintain its value against inflation. During market downturns, you might need to withdraw as little as 3%. During flush times, you might allow yourself 5%. But around 4% is generally safe.

Based on these assumptions, there’s a quick way to check whether early retirement is within your reach.

Multiply your current annual expenses by 25. If the result is less than your savings, you’ve achieved financial independence — you can retire early. If the product is greater than your savings, you still have work to do. (If you’re conservative and/or have low risk tolerance, multiply your annual expenses by 30. If you’re aggressive and/or willing to take on greater risk, multiply by 20.)

The numbers behind early retirement really are this basic. But, as I said earlier, just because the math is simple doesn’t mean the goal is easy to reach. Smart money management is more about mastering your personal psychology and emotions than it is about undestanding a couple of formulas.

To build your wealth snowball, you need to learn to live by your values rather than the values of your friends and family. (Or, worse, the values portrayed in the media.) You need to decide what’s important for you. If you remain focused on why you’re choosing to live on less, the “how” becomes easier to see. (Here’s how to write a personal mission statement.)

Yes, you can achieve early retirement. Others have done it, and you can too. The question is: What are you willing to do in order to reach that goal?

Author: J.D. Roth

In 2006, J.D. founded Get Rich Slowly to document his quest to get out of debt. Over time, he learned how to save and how to invest. Today, he’s managed to reach early retirement! He wants to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you reach your goals.

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Vicki Robin had no idea she’d become a millennial icon.

The 72-year-old coauthor of the 1992 bestseller Your Money or Your Life was recuperating from a hip replacement early last year when a young man she’d met at a sustainability event months prior told her she was popular on a Reddit forum about financial independence.

At the time, she was confined to the pullout couch of her Whidbey Island, Wash., living room, with its view of the Cascade Mountains and Puget Sound. So she had plenty of time to explore the online community where, to her surprise, she discovered she was something of a celebrity.

“It was stunning,” Robin says. “I’m an elder in a community I didn’t know existed.”

Robin’s fans belong to an impassioned, mostly millennial movement known online as the FIRE community, or simply FIRE. It’s an acronym that stands for “financial independence, retire early.” Adherents track down to the penny where their money goes, mindful of how much each purchase will really cost, with the idea that dollar amounts should be equated to “hours of life energy,” in Robin’s words. So if you make $300 a day and want to buy a $100 pair of shoes, you ask yourself: Are those shoes really worth nearly a third of a day of your precious time on earth?

As the first part of the acronym suggests, the goal of the movement is to gain financial independence, meaning you’re no longer relying on paid employment to keep afloat.

It’s no coincidence that the ranks of FIRE followers are spreading like, well, wildfire right now: The stock market has been very good to investors in recent years, especially to those who understand the magic of compound interest. Unemployment is low, and opportunities to earn extra money in the sharing economy are plentiful. Add the do-it-yourself spirit of a generation that can learn anything on YouTube, and you’ve got ripe conditions for a movement.

Redefining Career—and Retirement

What’s more, we all know that a traditional retirement is a thing of the past. No one works for 40 years at the same company anymore and retires to a front porch with a gold watch and a pension to show for it. So instead of tweaking the traditional model around the edges, these young people are saying, let’s just blow up the whole concept of career, and retirement, and start from scratch.

The financial independence subreddit has more than 350,000 subscribers around the world. A directory on the blog Rockstar Finance counts roughly 1,600 personal finance blogs, many dedicated to early retirement.

Grant Sabatier, 32, was living with his parents in 2010 and eking out a meager postcollege existence when he came across Your Money or Your Life. “It completely changed my life and trajectory,” he says. “It is still my favorite book of all time.” Sabatier, who says he amassed a fortune of more than $1 million in five years primarily through lucrative web-design side gigs, founded Millennial Money, an online community dedicated to personal finance education and entrepreneurship.

To say Robin is an unlikely financial guru is an understatement. She didn’t spend any time on Wall Street, and she seems more inclined to pass along her favorite kombucha recipe than the name of a favorite mutual fund. She speaks not in the empathetic bursts of Suze Orman but in the melodic voice she uses to sing soprano in a local choir. Her look these days is Golden Girls chic—and while she would seem like a blast to live with, she lives alone above two tenants, whose rent more than covers her housing expenses.

Having paved the original FIRE path decades ago, Robin hasn’t worked for a traditional paycheck in 50 years. After stints as an actress and in film production in New York City, she parlayed an inheritance at age 23 into a modest income that sustained a groovy 1970s lifestyle in which she lived in an “intentional community,” which is kind of like a commune, but less marginalized and more centered around mutual values—”the sharing economy before it was the sharing economy,” she says.

There, Robin taught herself practical skills, from auto repair and hunting to “making booze from dandelions,” a DIY strategy to become self-reliant by acquiring know-how that would enable her to tread lightly and travel cheaply through life.

It was only when people began asking how she lived on so little money that Robin realized she had a story to tell. She and her friend Joe Dominguez, with whom she had lived in the intentional community, teamed up to give financial education workshops around the country. They spread their money values, including planet-friendly frugality, the old-fashioned way in those pre-Internet days. Dominguez, who retired from a brief career on Wall Street at age 31, gave the lectures, and Robin produced them.

The two used their experiences to cowrite the first version of Your Money or Your Life in the early 1990s, a process she says took just nine months. The book first hit shelves in 1992, when she was 47.

The revised second edition of Your Money or Your Life is due out this spring. Robin wanted to write something for today’s millennials, whose prospects she worried were crimped by student debt. She had already begun working on the new draft — without Dominguez, who passed away in 1997 — when she discovered that the original still lived on Reddit; had she known that, she says, she might not even have embarked on the reboot. “It was providential,” she says.

Your Money or Your Life takes readers through a nine-step program intended to transform your relationship with money. It’s not about becoming rich; it’s about figuring out how much is enough. Once you buy less stuff, you won’t need nearly as much money to sustain your lifestyle as you previously did. Wisely invest the difference and wait until the interest thrown off by your portfolio exceeds your expenses. That’s the “crossover point,” Robin writes, and once you reach it, you can peace out of the paid workforce decades ahead of schedule.

The FIRE movement looks at this text as a bible of sorts, one that legitimizes its followers’ path to financial success and offers freedom from being a corporate drone, and ultimately a more satisfying life— a life typically sought after by the 65-and-older crowd. It sounds great. Who wouldn’t want to be in retirement bliss by 40, learning how to make his or her own version of dandelion wine?

But is it realistic?

It’s a very different world today than it was in 1992, when Robin’s book came out. Back then, government bonds—long a favorite source of retiree income—threw off a respectable yield of around 8%. But interest rates haven’t been that plump for a long time, and the 2018 version of the book acknowledges this new reality. Instead, Robin writes about a favorite investment of the FIRE folks: low-cost index mutual funds or exchange-traded funds (ETFs). She also suggests buying real estate, as she has done—in particular, you should consider small duplexes, triplexes, and quads, where you can occupy one unit yourself and have your mortgage covered by your tenants.

Financial Risks

This approach isn’t far-fetched, but it does come with certain risks, according to financial advisors. In order to retire at any age, a general rule of thumb holds that you need to save up at least 25 times your annual expenses. Say you need $50,000 to live on each year—you’ll need to accumulate around $1.25 million in order to withdraw 4% from it each year in perpetuity, adjusted upward for inflation. Robin’s calculations assume a 4% withdrawal rate, with a caveat: “Remember, this is a general example and not specific financial instructions.”

If the stock market posts strong gains, you can wind up with more money than you started with, even as you withdraw your inflation-adjusted living expenses of 4% each year. But if the stock market tanks, and you’re withdrawing on a declining balance, then you face the risk of running out of money.

The 4% rule is a solid method, but it came from research that assumed a traditional retirement of no longer than 30 years, says John Salter, a professor of financial planning at Texas Tech University and a partner in the planning firm Evensky & Katz/Foldes Financial Wealth Management. All bets are off if your retirement lasts 60 years. You’ll have to watch your withdrawals closely and dial back your spending, potentially significantly, if the market declines, he says.

Early retirees also have a longer runway to experience inflation. Prices for regular goods and services roughly double every 25 years, so a 30-year-old early retiree will see general prices rise fourfold over his or her lifetime, Salter says. (Medical costs rise at an even sharper rate.) In other words, you had better hope that stocks continue posting inflation-beating gains.

All the Flavors of FIRE

To be sure, there are many subcultures within the FIRE movement that all have their own spending goals and takes on Robin’s prescriptions. Some are more drastic than others. There’s regular FIRE, for all those people who want to exit the rat race early but might like to occasionally enjoy a good restaurant on the way, or hire a plumber to fix their broken toilet instead of breaking out the wrench themselves. There’s also barista FIRE, for those who might need or want to supplement their savings with a part-time job at a place like Starbucks for the health insurance—a key necessity for early retirees.

On the extreme ends, there are the frugal FIRE adherents, who base a lot of their ideology on the writings of Pete Adeney, a.k.a. Mr. Money Mustache, a FIRE hero who in 2011 started blogging about his retirement at age 30 from his short career as a software engineer and the frugality and DIY spirit that contributed to his success. Adeney, now 43, is so prominent, he’s inspired a loose network of camps in his name. Devotees gather in spots like Gainesville, Fla., and Seattle for Camp Mustache, where talk of churning credit cards for points mixes with traditional camp activities like archery and bonfires. Adeney himself attends the annual Seattle retreat. The $425 tickets for this year’s event, to be held over Memorial Day weekend, sold out last November in less than a minute, as if they were for a Taylor Swift concert.

On the other end of the spending spectrum, you have fat FIRE, for people who want to spend a healthy amount in retirement, maybe because they want to keep living in an expensive city. They have higher savings goals, starting around $2 million, according to a young fat-FIRE devotee in New York City.

Despite their different strains, FIRE walkers have more in common than not. “You’re kind of an oddball in our society if you make a lot of money and choose not to spend it,” says Darrow Kirkpatrick, a former software engineer who retired early at the relatively ripe age of 50.

FIRE folks love meeting up in real life so they can geek out on stuff they might not feel comfortable sharing with friends or family. You know you’ve found your tribe when you can call Roth IRA conversion laddering “beautiful” and have a sea of faces nod earnestly in agreement, as happened at a recent FIRE meet-up in New York City.

For Early Retirees, What Next?

Of course, reaching financial independence is only part of the equation. Once you get there, you have to figure out what to do with the rest of your life—how you’ll spend a retirement that could last 50 or 60 years. That’s a whole lot of downtime, and most people planning on retiring early aren’t thinking about the looming void. “The vast majority are focused on numbers and calculations,” says Grant Sabatier.

He’s now a business partner with Robin in the new website yourmoneyoryourlife.com. He believes many FIRE followers neglect the “spiritual transformation” that can happen when you change your relationship with money. The community remains overwhelmingly male and is heavy on those who naturally organize their thoughts in spreadsheets, like tech types and engineers. Some look down from their huge pile of savings on the masses who, the perception goes, mindlessly go through the motions in their day jobs so they can mindlessly spend on weekends.

Missing is any acknowledgment of the privilege embedded in the ability to save 50% or 75% of your income to begin with. The FIRE movement, to a large extent, remains a culture of “very entitled white men who are very proud of themselves when it wasn’t much of a stretch for them anyway,” says Emma Pattee, 27, a writer based in Portland, Ore., who retired last year at 26 after making successful real estate investments. Many FIRE followers, she says, are already high earners who “disdain all the Midwest minions who can’t get out in front of their truck loan.”

Another unforeseen hazard: Some FIRE bros flame out months after pulling the plug on their jobs. When you’re clocking 14- or 18-hour days at a startup, it’s easy to fetishize a life of home brewing and farming in bucolic Vermont or rural Virginia. But actually home brewing and farming can be lonely and backbreaking work, says Pattee, who knows people who have had to publicly walk back their much-celebrated retirements when the reality fell short of their fantasy. “That’s the problem with just trying to win,” she says.

So how do you fill all those decades when you no longer have to work for pay? It’s not an idle question: There’s a body of research linking early retirement to premature death. “We think it’s not about taking Social Security per se, but it’s about the act of retiring,” says Maria Fitzpatrick, an associate professor at Cornell University, who found that men who retire at age 62 have an increased early-mortality risk of about 20%.

Although her research isn’t on the exact FIRE demographic—after all, it focuses on those who retired at 62 as opposed to 32 or 42—some FIRE followers are well aware of it. Adeney says retiring very early makes it easier to live a longer life than people who retire in their early sixties.

In many ways, FIRE followers are forging into uncharted territory. We don’t have any data on whether extreme early retirees have a tendency to get sicker or even die earlier in greater numbers than their traditionally employed peers, whether they burn out from all the leisure time and return to paid work, or whether they instead live decades in fulfilled contentment, nurturing their passions and giving back to their communities.

Tanja Hester, a FIRE follower who leans toward the frugal strain of the movement and retired late last year at age 38 from her career as a consultant for political and social causes, realizes she’s in a privileged position. “I feel like one of the luckiest people to ever live, and if I can’t use some of it to help others, it will feel like a waste,” she says. She and her husband, who live in the North Lake Tahoe area of California, volunteer at the local humane society and plan to start teaching financial basics in their community.

For her part, Robin gives back by investing in local businesses. Aside from using royalties to pay for cancer treatments in the mid-2000s, she says she’s given away a significant portion of the money she’s made over the years from her bestseller. And she still thinks our society places too much stock in paid work.

She knows the FIRE walkers have an uphill battle, both in their personal finance goals and in the cultural norms they’re bucking. Still, she wishes the best for those who would follow in her footsteps. “If they can endure the identity crisis, then they’re the folks who are woke, and they can take action,” she says. “There’s another generation, hallelujah, that’s adopting these values.”

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The rich think about money a little differently. Here’s how you can capitalize on what they know.
Image source: Getty Images.

At times, rich people seem to inhabit another world, one apart from the financial concerns of the hard-working middle class. Many speculate that there’s a secret to joining the ranks of the elite, often involving an inheritance from a wealthy relative or a multibillion-dollar idea. But the truth is, it usually comes down to drive and smart financial planning.

These aren’t exactly secrets, but they’re often what separate the wealthy from the wishful thinkers, and they’re often overlooked. Here are four of the “secrets” that can help any worker grow their net worth.

1. Your money should be working for you, not the other way around

Conventional wisdom says that you must get a job and work hard to build wealth. There’s truth in that, but if your only means of income involves trading time for money, then your income potential is limited by the number of hours in a work week. The wealthy know that making money doesn’t always require hard work, and they take every opportunity to generate new sources of passive income.

Passive income can come from several sources, including rental properties, royalties on creative works, or investing. You don’t need a lot of money to start investing, but it’s important to keep your portfolio diversified so you don’t expose yourself to too much risk. Don’t try to time the market by selling when you think it’s at a peak or buying when you think it’s at rock-bottom. That approach is almost guaranteed to lose you money. You’re better off buying quality investments and holding them for the long term.

It’s important to understand the costs associated with all of your passive income streams. For example, if you run several rental properties, there may be maintenance costs that eat into your profit. Similarly, when you invest, there may be costs associated with your investment products, like fees for each trade or expense ratios on mutual funds. Try to keep these low to help maximize your profits. Index funds are a great choice for investors who want a cheap way to diversify their portfolio and earn substantial returns.

2. Keeping up with the Joneses will cost you every time

Most people think the rich live lavish lifestyles, and while some of them do, many of the wealthy got where they are by living frugally and investing a big portion of their earnings. Oracle of Omaha Warren Buffett still lives in the home he bought in 1958 for $31,500, and Amazon CEO Jeff Bezos — currently the richest man in the world — still drove his old Honda Accord for years after becoming a billionaire. It can be difficult to avoid the temptation to spend beyond your means, but it’s crucial that you resist. Otherwise, you could find yourself in debt, which will hamper your ability to save for the future even more.

Set a budget for yourself, if you haven’t already, and strive to set aside at least 20% of your income for savings whenever possible. When you get a raise, raise your monthly savings amount before doing anything else. And if you’re already in debt, take steps to pay it down. A balance transfer card is a nice option for tackling credit card debt. You could also try a personal loan.

3. Time is your most valuable currency

When it comes to investing, your most valuable asset is time. Money you contribute earlier in your life is more valuable than money you contribute later, thanks to compound interest. At first, you’ll just earn interest on your initial contributions, but over time, you’ll also begin to earn interest on your interest, helping your balance grow much faster. Consider this: If you invested $10,000 when you were 25, it would be worth over $217,000 by the time you turned 65, assuming an 8% annual rate of return. But if you waited 10 years to invest that $10,000, it would only be worth $101,000 in the end.

Even if you can’t afford to invest much money today, your small contributions could still grow into a large sum over time, so you’re better off starting now rather than waiting until later. Automate your investments whenever possible so that you don’t have to worry about remembering to set aside the money on your own every month.

4. It’s best not to go it alone

Wealthy people don’t always know the most about finances or investing, but they do understand the value of expert advice from a professional. While some people might balk at the cost of hiring a financial adviser to manage their money, the wealthy understand that, with an adviser’s help, their money could grow faster than it would if they were managing it on their own.

A financial adviser may be able to suggest investments and strategies that you hadn’t considered to achieve your financial goals more quickly. It’s crucial that you choose a fee-only adviser, though. Unlike fee-based advisers, fee-only advisers don’t earn commissions on the investment products they sell to you, so you don’t have to worry about any potential conflicts of interest.

Wealth rarely comes overnight, but by being responsible with your money, seeking out new and greater sources of income, and asking for help when you need it, you can steadily grow your net worth over time.

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