The 28-Day Green & Green Challenge; Retire in 10 Years.
Sure, you can stick with planking, detox cleanses, or FitBit steps for your "big" resolution in 2019, but if you want big girl change that will reshape your life, take the Green & Green Challenge.
Another circle 'round the sun, and here we are in 2019. The New Year is ripe for resolutions, and 30-day challenges are all the rage. I'm skeptical of the industry pushing workout trends and diet fads of 2019, but there is evidence in support of routined behavior.
By implementing one small change for 30 days you are well on your way to establishing a lasting behavior. It could be as simple as taking one picture, biking to work, or switching to reusable bags. The more small challenges you accomplish, the more likely you are to try new things and have them stick. Before long, these small life improvements add up as your confidence grows and your brain strengthens new neurologic pathways.
Now what if your 30-day challenge was a stepping stone toward a larger, impossible future goal - say, financial independence? With all that debt you carry. On a low income. Are you up to it? It's not going to be easy, or resemble any pampered, stylish New Year's resolutions from Goop. It's going to be taking a hard look in the mirror, facing your endless excuses, and committing to leading a life you value. Let's put on our big girl pants and begin.
The Ten Year Plan: Make a goal and work backwards.
I approach financial planning the same way I approach developing my 11th grade science curriculum; backward. Every August I revisit the same question:
"What learning targets do I want my students to have mastered by June?"
I chunk the material into units, then into individual lessons. I begin by writing the test, then construct a flow of activities and smaller assessments that will lay the groundwork and build on their understanding over time. If I started the year without a clear path or ending point, my students would be unable to track their own learning or make goals for themselves.
Within this model there is ample opportunity for creative projects and messy problem-solving, and adjustments are inevitable. An effective educator, like a financial planner, keeps momentum moving in a targeted direction, but has the flexibility and confidence to diverge here and there if additional exploration or revisiting ideas is valuable.
Planning for retirement requires the same outlook - a longterm goal, touchstones, and the ability to adapt to ever-changing conditions. There are many factors to consider and calculations to make, predictions to hedge about markets and inflation and interest and taxes, and adjustments to tweak along the way to ensure a seamless transition to life-beyond-work. With that said, setting it up is the hard part. Sitting back and watching your money grow is the gift that keeps on giving.
Getting Started: Don't wait to take the first step.
Maybe these daunting details have kept you from ever taking the first step. So what if the phrases, "asset allocation, index securities, and expense ratios," don't roll off your tongue with the same fluency a sommelier in Paris uses to describe wine - that never stopped you from drinking, right?
Don't let a lack of knowledge intimidate you from getting started down a path towards freedom. Every day you wait to invest can delay your retirement by months. I'm serious. The math is staggering.
It's Never Too Late.
The graph to the left shows the power of compound interest, most likely in an IRA account. A 401K or other employer contribution plan would yield much steeper exponential growth, as your pre-tax contributions would be matched by your employer each paycheck. In other words...
There's free money for the taking, what are you waiting for?
I got a wild streak last year and decided to up my contributions to my TIAA retirement fund to 24%, with a matching 6% from my employer. Without any conscious effort, every two weeks 30% of my PRE-TAX income is invested. In 2018 my funds grew by more than 25%* in the bull market, but as predicted, growth has slowed as the market has become more volatile. I don't miss the money I invest, in fact, I don't even notice it's withheld from my paycheck. Of course, it was fun to check in on my investments from time to time in 2018 to discover my money was earning more than the 60 hours I put into my job the previous week.
Introducing the 28-Day Green & Green Challenge.
Adopt these habits for the month of January and set your sights on financial independence in a decade.
Aggressive. Efficient. Practical. Life-Changing. Here's my theoretical month-long program that can put you on a path to financial independence in roughly 10 years. This is not a 28-day get rich quick scheme, nor a hot workout trend that will yield rippling results in as much time. If you are mentally prepared to take some big girl steps and shift your lifestyle toward a better, albeit different, approach than you and every other Joe have been taking, this challenge is for you. It took me over a year to adopt all of these practices, but, hey, I didn't have a step-by-step guide like this to prepare me.
You want me to invest 50% of my income, trade my car for one without turbo/leather/8 seats, and pay OFF my credit card debt in ONE WEEK?
The answer is yes and no. This isn't a take it or leave it scenario. Do what you can, but I bet you can do more than you think. I purposefully started with the hard stuff, because personally I like to leap into the lake, not dip in slowly. Also, those three actions - investing in retirement accounts, reducing vehicle costs, and getting out of debt - are the most impactful changes you can make. Compound interest shows us that starting now is going to set you up for a bright financial future far better than avoiding paper towels or turning off the lights. Sure, the small habits add up, and we can all do our part to reduce our footprint. The environmental ethos is important to include because this is all part of a lifestyle shift toward efficiency and common sense.
I laid out the plan above based on what has worked the best for me, and I believe the same steps can work for others. Again, this is a snapshot of my first year of taking my finances seriously. This chart represents countless hours of researching financial news, books, blogs, and podcasts, and speaking with friends, colleagues, and financial planners. I ran numbers using a hundred different hypothetical situations and assumptions, and tried out new DIY hacks that saved me money and reduced my household waste. Like the challenge states, I save and invest roughly 60% of my income. I'm here to say it's bold, not impossible.
It goes without saying that for all of this to be worth it, you should be finding joy out of the creative ingenuity. In all its glorious cliche, the journey should be just meaningful as reaching the destination. I'm not simply working hard and saving to retire - I'm working, learning, adapting, learning, failing, learning ... for the sake of ... learning. And in just 9 years I plan to reach a point in my life where I can dedicate the rest of it to learning, unconstrained by a 40-hour work week. I want to be free to learn in a new direction. January is here, what will you do for the next 28 days? Here's to new directions in 2019!
*The 2017-18 stock market boom is unsustainable by every metric, but over time the market tends to average around 7% growth, which is the figure I use in retirement calculations. When, not if, the market crashes again, I am spread across a diversified investments. Most importantly, I have the long game in mind, so I do not irrationally react to market changes. As I mentioned, the hard work is setting it up, but here's your map to freedom!