Einstein is attributed to the saying, “Insanity is doing the same thing repeatedly and expecting different results.” I would add that insanity is doing what everyone else is doing over and over and expecting different results.
Everyone talks about retiring early, but what the crowd is doing isn’t working. If you want different results, you must go against the grain and do something the crowd isn’t doing. Take, for example, the following story.
According to legend, in 333 BC, Alexander the Great arrived in the city of Gordium, which was located in what is now modern-day Turkey. There, he encountered an ancient wagon tied to a pole with a knot that was so intricate and complicated that no one had been able to untie it. According to a prophecy, whoever could untie the knot would go on to conquer the world.
Many people had attempted to untie the knot before Alexander, but they all failed. Alexander, however, was determined to succeed. After examining the knot, he realized that it was so tightly wound that there was no way to untie it traditionally. So, he drew his sword and cut through the knot, thus “untying” it and fulfilling the prophecy.
This story symbolizes Alexander’s resourcefulness, ingenuity, and ability to think outside the box. By seizing the opportunity in front of him and taking an unorthodox approach, he was able to achieve something that no one else had been able to accomplish. The story of the Gordian Knot has since become a metaphor for taking bold action and making the most of the opportunities that come your way.
Before Alexander, everyone who attempted to untie the knot all likely did the same thing – namely, attempting to use sheer force and strength to loosen the grip of the rope. Every successive person did the same thing as their predecessor – expecting a different result. This was collective madness. It took someone to come along who realized that doing what everyone else did would be futile. Instead, he thought about the problem and came up with a solution by thinking outside the box.
In the modern day, an example of collective madness is how most people think that what they have been taught and what tradition has been indoctrinated in them when preparing financially for retirement works.
The truth is most Americans are unprepared for retirement. They do not have sufficient funds to last them through the end of their days. Many retirees are dismayed because they did exactly as society, family, friends, colleagues, the education system, and corporate America had advised. They worked diligently in their jobs and set aside a percentage of their paychecks towards their 401k’s, believing they’d have enough for retirement. It turns out that strategy doesn’t work. It’s estimated that the average American needs at least $1 million for retirement. Most Americans don’t nearly have close to that amount for retirement. According to at least one source, As many as “80% of U.S. pre-retiree households are financially unprepared for a secure retirement.”
Tradition has its place in society, and there are instances where it plays an important role in carrying on important concepts such as love of country and family. Still, when it comes to retirement, tradition fails Americans.
As the data shows, tradition and the Wall Street way don’t work. However, a segment of Americans retire early and have plenty to last them through retirement. These Americans come from all walks of life. It’s not just professionals. There are plenty of school teachers and laborers in this group. So, what did they do differently?
Americans who achieve financial freedom understand a simple concept early on that nobody else talks about and that Wall Street doesn’t want you to know. But these Americans are not afraid to go against tradition. By going against the grain and bucking the usual trends, they can amass adequate funds that allow them to walk away from their jobs early and on their terms. So what is this concept?
Passive Income (that can sustain your current lifestyle) = Financial Freedom
Suppose you have income independent of your job that can cover your current expenses while maintaining your lifestyle. In that case, you are no longer tied to your job and have achieved financial independence. Investments that generate a passive income that can be reinvested to augment current streams of passive income or create additional streams.
The type of income investments ideal for creating wealth and achieving financial independence are cash-flowing commercial real estate and private investments in income-producing businesses (i.e., private investments or private equity).
Unsurprisingly, ultra-high-net-worth individuals (UHNWIs) consistently allocate more than 50% of their portfolios toward these two specific assets. Cash flow, underlying appreciation, and significant tax benefits are triple threats for creating wealth and accelerating the financial freedom timeline that traditional assets can not offer.
The formula for achieving financial independence is not complicated and can be boiled down to a few simple concepts:
Earn. A job is an initial step for anyone seeking financial independence. What you do with your earnings will set you apart from the crowd.
Save. Set aside a portion of every paycheck for the next step. Most Americans not only do not have savings but also go into debt to amass things and engage in activities that drain their pocketbooks.
Invest. Use your savings to invest, but don’t follow the crowd. Look to the example of investors who have already achieved financial freedom. Explore commercial real estate and private equity.
Focus on Passive Income. Passive income is the key to everything. Once your passive income meets or exceeds your expenses, you technically no longer need your job. Now you can upgrade your lifestyle through passive investment income instead of earned income and live a life without worries and with freedom of time.
A comfortable retirement is not only possible but highly achievable. You just have to be willing to think outside the box and go against what everyone else is doing.
Instead of focusing on just growth and 401k’s, think about private alternative assets like commercial real estate and private equity to generate passive income to achieve your goals. To retire early, take a new path.
Kyle Jones is a co-founder and Key Principal of TruePoint Capital, LLC. Kyle is responsible for the company’s strategic planning, investment decisions, asset management, and overseeing all aspects of the company’s financial activities, operations, and investor relations.
Kyle obtained a Bachelor of Science degree from Texas State University – San Marcos, where he also played Division 1 Baseball.