Everyone plans to retire at age 65. Why 65? Who came up with that number and what is so magical about it anyway? Let’s take a quick look at today’s 65–year–olds according to the Department of Health and Human Services:
- 54% are dependent on Family, Church, or the Government.
- 36% are still working.
- 5% are no longer living.
- 4% are “financially independent” living on $36,000 a year.
- 1% are Wealthy.
Now let’s take a quick look at the Wealthy 1%:
- 20% are doctors, attorneys, or CEOs.
- 5% are salespersons.
- 1% from lottery/inheritance (How’s that working for you?).
- 74% are Business Owners and Real Estate Investors.
If 74 out of 100 wealthy people are business owners and real estate investors, doesn’t it make sense to do what wealthy people do? Of course it does, but the main reason we don’t is because this isn’t something most of us grew up with. The 10,000 meals at most of our dinner tables growing up didn’t involve discussions about investments, businesses, or real estate. We didn’t talk about credit, mortgages, balance sheets and financial statements. It’s just not something a lot of us understand because no one ever taught it to us.
Have you ever taken a look at the Forbes 400? This is the list of the 400 wealthiest people in the United States, and almost all of them made their fortunes with business ownership and real estate. That is why it is our responsibility to educate ourselves and gain the knowledge that the wealthy have, and implement it.
What’s It To You? Forbes 400 aside, for a lot of us it’s not really about the money is it? For most of us, financial freedom would include activities that we are truly passionate about. Some would be sailing the Mediterranean, touring a winery in Tuscany, or taking a drive on the Côte d’Azure. For others it would be a lot of volunteer work, contributing to charities, giving more at Church, or freeing up quality time to spend with family and children.
So what do you need to retire and start living the life you are passionate about? For most of us, the solution is passive income and I’m not talking about Social Security. Passive income is money that you do not have to trade time for dollars in a job, it is money that is earned for you via assets such as stocks, businesses, and Real Estate.
In the world of the wealthy, when you have enough passive income coming in to cover your monthly expenses, you ARE retired. It doesn’t matter how old you are when you become financially free, because when your expenses are taken care of passively, you will have the time to do those things that really matter to you. So why retire at 65–years–old, why not retire in 5 or 10 years? How can you achieve a level of passive income to satisfy your expenses? Real Estate is the key to any wealth and retirement strategy.
Real Estate Is I.D.E.A.L Income – Passive cashflow is the cornerstone on which to build. Can one rental property have a positive cashflow of $400 a month after mortgage, insurance, and management fees are paid? Of course, own 10 of those and $4,000 a month passive cashflow can really change the quality of your life couldn’t it?
Depreciation: Real Estate is one of the only appreciating assets you can own that you can depreciate and take deductions against on your taxes. This is what wealthy people do because they know that owning real estate has many tax advantages.
Equity: The difference in the value of your property, and what you owe on it. Home equity loans or lines of credit can allow you access to that equity to reinvest. Better to have it and not need it, than to need it and not be able to access it.
Appreciation: Real Estate has consistently appreciated over the years. A $30,000 property purchased 30 years ago is now worth $200,000 today.
Leverage: You can put 5% down, or $10,000 on a $200,000 property, and the bank will loan you 95%, or $190,000 to purchase real estate. Try asking your bank to loan you $190,000 to buy stocks, bonds, or mutual funds and see what they say. The wealthy understand Leverage, because when your $200,000 home appreciates 7% next year, you will have made $14,000, which is a 140% return on the $10,000 you invested.
77 million Baby Boomers are downsizing, 80 million Echo Boomers are starting families, and all are looking for residential real estate. Where would you be if you had purchased 10 properties 20 years ago? What will you say 20 years from today? Financial freedom is attainable regardless of background or upbringing because we are all in possession of two essential assets: 24 hours in a day and the brain in our head. What will you do with yours?
