Stay away from venture capitalists, I’m doing my exit too

During a dinner on my 30-[redacted] anniversary, my partner and I were poetic about our life goals. They range from small (getting an “adult” couch and a second dog) to large (buying a house outside of Brooklyn for said dogs to roam free). But the fantasy faded the moment we got our entrees. None of us are close to financial independence and have more questions than answers about how to build wealth outside of the typical 9-to-5 gig.

Reality pairs well with Prosecco and aging, FWIW, so like many millennials and Gen Z seem to do, I decided to explore my own potential exit strategy. With some great advice from a savvy financial podcaster, tons of research, and the help of Personal Capital’s free tools, I’ve learned a thing or two on the subject, so you needn’t wonder if you will need to work until you are in your sixties or sixties. Spoiler alert: you don’t. Let’s dive into it.

What is a personal exit strategy?

Thanks to social media, a glimpse of this billionaire lifestyle has been more visible than ever. And the concept of unicorns, private companies valued at over $1 billion, has also moved the idea of ​​exit strategy into the air.

It’s something we can all start striving for (and planning for), even if it feels different for each person. For some, this means the ability to stop working altogether. Others might continue to work, pursue passion projects, or take on full-time side businesses. At the heart of this idea is the modern concept that work is optional and early retirement is possible. By achieving financial independence, we are the ultimate architects of our time and how we want to spend it.

moon kyung chang

Moon Kyung Chang

How do you determine your first shot?

Personal Capital’s free net worth calculator is an easy way to see where you stand financially. This can give you a quick estimate of your net worth based on your assets – of which I have none – and your liabilities – of which I have a lot. Then you can smartly invest your money in a way that works for you.

I don’t know exactly the right way to invest for me, but I’m sure of one thing: throwing each expendable dollar you have in a 401k is not movement. You can’t touch it without penalty until age 59.5 with a few exceptions – and remember, I’m 30 -[redacted].

To get started, I reached out to Kyle Ryan of Personal Capital for advice. Having a personal exit strategy means thinking about what your path to “retirement” looks like and one school of thought on this is known as the FIRE (Financial Independence Retire Early) movement. Those who practice FIRE save with the goal of leaving their 9-5 well before they reach 65 (some of them retire as early as 30).

According to Ryan, the concept of FIRE boils down to five things:

  • Extreme Economy (I don’t do that.): Put 50-70% of your gross income into your retirement savings and contributions and live on what’s left.
  • frugal living (I do some of that.): Expense-saving strategies like cutting the cord, using a rudimentary cell phone, and not eating out.
  • Regular and tax-efficient investments (I have a money guy.): Taking advantage of your company’s 401k match, opening an Individual Retirement Account (IRA), etc.
  • Debt elimination (I’m waiting for some government decision on this.): Settling on credit cards, home mortgages, student loans, etc., which is even easier with the help of the Personal Capital debt repayment calculator.
  • Revenue Maximization (I work a job and you read it.): Have a second business or work multiple jobs to ensure higher gross income.

To be fair, FIRE might not be for me, but if it was… I have both a ROTH and a traditional IRA, as well as money invested in stocks. It’s something, isn’t it?

What are the resources?

Turns out spending three hours on social media every night isn’t completely useless, Mom. In addition to Personal Capital’s tools and advisors, the creators regularly post about FIRE, frugality, and investment options.

Andy Hill discusses early retirement strategies on his show Marriage, children and money, which frequently features young millionaires, financially independent couples and debt-free parents to help its audience think more critically about their own financial success and exit strategies.

With over 350 episodes, the podcast is a byproduct of Hill making Coast FIRE — saving enough for retirement so you can pursue part-time work or passion projects instead. “At the beginning of our marriage, my wife and I were spending almost all of our money. We were saving and investing some of it, but we really didn’t have a goal or purpose behind it,” he says. Eventually, that goal became clear: “I wanted time to take care of my health, pursue my interests, and be the parent and husband I always wanted to be.”

Hill and his wife began eliminating $50,000 in student debt in about a year. They did this by pledging to live on half their household income (about $180,000 at the time). By age 40, they had saved $500,000 for retirement — which will continue to grow with compound interest — and by age 45, they had paid off their $500,000 mortgage.

“Now that we no longer have to worry about paying debts and have basically built our own pensions with Coast FIRE, my wife and I have the option of working part-time,” says the family financial coach referring to the beautician. “We now live full time, instead of working full time.”

The strategies are simple: reduce living expenses, contribute to the retirement fund, eliminate debt, seek advice. It’s their practice that can take some getting used to. Alas, in addition to social media, blogs and podcasts, fiduciary financial advisors can offer advice on what it would take to set your personal exit strategy in motion.

Where should you invest your money right now?

Don’t look to me for what stocks to buy. The market changes as quickly as trending hashtags. Consider low-cost index mutual funds or the aforementioned index exchange-traded funds (ETFs), real estate investment trusts (REITs), and IRAs. You can also opt for totally non-traditional options, like investing in the designer economy (aka a side business), or art and fine jewelry that can appreciate in value.

My final parting words of wisdom are: sit down and think (always over drinks and dinner when possible) and start considering your own exit strategy. There is a lot of life there. Yes, even beyond social networks.

Personal Capital has compensated the author for providing content for this article. This content is intended for general informational purposes only and is not intended to constitute legal, tax, accounting or investment advice. The author recommends Personal Capital’s free financial tools and is not an investment client.

Leave a Reply