How to Retire in 7 Years Starting with $0 Income

I believe the biggest reason most people don’t achieve early retirement is that they were never given a step-by-step guide.

The only path that seems to be pushed in schools is to get a nine to five job, save your money, work until you’re 65 and finally retire when you’re too old to enjoy it.

Luckily, one of the businessmen I looked up to explained it in a slightly different way. He said the word retirement should be replaced with the word freedom, because once you reach a tipping point when you have enough money to stop working, you have true freedom.

Every day, you can do exactly what you want. No questions asked. Maybe that’s relaxing on a beach, sipping a Pina colada, or building businesses that change the world like Elan Musk.

When you have the ability to retire, it’s entirely up to you how you spend your time. So on that note today, we’re going to discuss the plan I used to reach my retirement goal in my late twenties, starting from $0.

This may be a little extreme for some people, but that’s just me. I’m either a hundred percent in, or I’m not in at all. Obviously you can take this plan at your own pace and who knows, maybe you’ll even beat me.

Phase one is all about your freedom figure. This is the target that you have to reach in order to have full control of your life. This is something you should know, even if you’ve got $0 in the bank.

If you don’t know your freedom figure, then it’s a bit like being blindfolded in a running race. You can’t see where you’re going. So you may end up putting all your efforts in going in the wrong direction or even tripping up and falling flat on your face.

The reality is there are three types of people in this world. There are doers, dreamers, and drifters, otherwise known as the three Ds. Actually thinking about it, when I was at school, they gave me a cap with D on it.

They must have known I was a doer. So let’s start off with drifters. They go through life, living paycheck to paycheck, without any financial aims, they don’t really see the point of saving or investing money as retirement feels like it’s not something a young person needs to be thinking about.

Dreamers do have financial goals, but they don’t have any plans in place to actually achieve them. So they will forever just stay dreams.

And finally, doers. They have financial goals, but most importantly, have a plan to reach them. And that’s where your freedom figure comes in.

This is a very individual thing and it all depends on how much you want to pay yourself each year when you retire. There’s actually a great way to figure this out.

And it’s called the times 25 rule. So let’s firstly, assume you want to make $50,000 per year without working.

Secondly, we would need to multiply 50,000 by 25, which gives us 1.25 million dollars. The idea is that you’re able to withdraw 4% of this per year without ever running out of money.

You guessed it, 4% of $1.25 million is $50,000. 1.25 million dollars, how am I ever going to get that in seven years?

I know this may sound tough, especially if you’re starting from $0, but it is possible. No one said it’s going to be easy, but with the right approach, it can be done. I mean, if I can do it, then so can you.

In the early stages of your retirement plan, the way you think about money is crucial. It’s all about getting the right mindset in place. The key is to prioritize building wealth over cashflow.

This is because building wealth, it’s about locking your money away in assets that increase in value.

Whereas cashflow gives you more money flowing into your pocket. Now this may sound great, but it can lead to a variety of problems, such as lifestyle inflation and sky high taxes.

Cash flow is extremely important, but more so later in life, once you start to unwind. This is why whenever I made some extra cash, when I was younger, I made sure to reinvest the majority of it.

Of course, I get it. Sometimes it can feel really nice to secure some profit and lock it away in your bank account. It can give you a false sense of security knowing you’ve got all your money sat in your account for whenever you need it.

But the reality is you often don’t need as much money as you think. Forming a habit of in your cashflow is absolutely essential when it comes to building wealth, as fast as possible and hitting your freedom figure.

Phase two is laying the foundations. This is kind of like building a house. You need to lay a solid foundation to ensure your house doesn’t crumble at the first sign of an earthquake.

Unfortunately, 70% of millennials now live paycheck to paycheck, which means they’re building their lives on an unstable base.

Just like building a house on quicksand. If you find that unbelievable then this is even more shocking. 40% of Americans with an income greater than a hundred thousand dollars a year are still living paycheck to paycheck.

This just goes to show how important laying the foundations are. And even though it may seem simple, many people are failing at this phase.

There are four stages I considered when I was in this phase during my early twenties. The first stage is paying off high interest debt.

It’s crucial to pay this off before you even consider investing in your money, as high interest debt is holding you back, but saying this, it is very important to understand the difference between good debt and bad debt.

Good debt is anything low interest that makes you money. For example, the mortgage on a rental property or low interest finance on a laptop to build an online business.

Bad debt is high interest debt that doesn’t make you any money. For example, shopping for clothes on buy it now later credit card debt, or even a typical bank loan.

All of this debt needs paying off as soon as possible. I was in quite a lot of debt when I was 18. And in order to get out of it, I used the debt avalanche method, which involves making the minimum payments on all my high interest debt.

Then I used any extra money to pay off the debt with the highest interest rate first, which was my store credit card at 32%. Crazy, I know. Signing up for that was a huge mistake.

I then worked my way through the bad debt with the lowest interest rate, which was my car loan at around 15% of the time. Within a year, I’d managed to get everything paid off.

The big lesson here is you can’t invest to build wealth when being weighed down by bad debt.

Stage two is putting aside an emergency fund. This is essential for your foundations because if you start investing without an emergency fund, you might find a few months down the line, you get into a spot of bother with an unexpected expense and no cash to pay for it.

You will then have to pull your investments out to cover the expense, and then you’ll miss out on the potential profits.

Stage three is building a great credit score. A credit score is a bit like your resume. It follows you around in life, is regularly updated, and it helps lenders decide whether you’re a worthy borrower.

Having a good credit score is especially important if you ever want to get a loan in the future, for example, to buy your dream house.

You just never know when you’re going to need it. I should have actually started building my credit score a lot sooner than I did because it’s so easy to get started.

All you need to do, as soon as you turn 18 is get yourself a credit card. Start putting in a few little expenses on it like gas and pay that baby off in full at the end of each and every month.

This way you pay no interest and prove to the lenders that you’re a reliable borrower.

Stage four is reducing your tax liability. Every dollar you earn has hidden costs. Of all the expenses, however, taxes can sting the most and take the biggest bite out of your money.

No one likes the tax man. The good news is that tax efficient accounts can minimize how much tax you have to pay and maximize your savings.

In my early twenties, my income was really starting to get eaten up by taxes. So I started looking for the best ways to save as much as possible.

I then discovered if I opened up a retirement account, the I can save money I hadn’t paid tax on. This is known as a 401k in the USA and a SIPP in the UK.

Of course I will eventually have to pay tax on this, but as I’ll be older, I’ll be in a much lower tax bracket because I’ll be earning less.

So hence, I should save quite a lot of money. But I didn’t stop there. I opened another account, that allowed me to save money that I’d pay tax on, but in the future, I wouldn’t have to pay tax on my capital gains.

Or in other words, all the money that the money generated. This is called a Roth IRA in the USA and an ISA in the UK.

I firmly believe that everyone should set up both of these accounts as soon as possible, as I know it really reduced my tax burden. So once you’ve built up these solid foundations, it’s time to start expanding.

Phase three is building multiple income streams. I like to think about it like this. Imagine Spiderman is you. The platform is your life, and the skittle is your everyday job.

If you get fired, guess what’s happening. Now, imagine this. Spiderman is you, the platform’s your life. But now, you have multiple income streams.

The stock market could crash. You could lose your job, or your side hustle could fail, but your life is supported by your other income streams.

This makes it very hard for someone or something to come along and strike you out. A secured job is nowhere near as common as it once was with the average person now working 12 jobs in a lifetime.

There isn’t one perfect solution for everyone, but something that has worked for me over the years is to pick side hustles that take advantage of my existing skills.

So I don’t have to learn something completely new. This will often end up being something you’re passionate about as you develop the skills without even knowing it.

Sometimes we can lean towards what will pay the most. But when looking to build long-term wealth, sustainability is important.

So when waking up every morning, being passionate about your line of work is a great idea. As Richard Branson once told me over lunch, there is no greater thing you can do with your life and your work than follow your passions in a way that serves the world and you.

Well, that’s actually one of his most famous quotes, but it did say something along those lines. It was about 20 years ago. But one thing I do remember all the details about was the fantastic spaghetti Bolognese made for me.

There are many different side hustles you could start such as affiliate marketing, E-commerce, becoming an influencer, drop shipping and even good old fashioned window cleaning, bin cleaning, driveway cleaning, photography.

The list goes on. The main takeaway here is the higher perceived value you have according to society, the more you will get paid.

If you do the bare minimum or your service doesn’t really help people, you’ll be paid the bare minimum. It’s important to go above and beyond and provide value as best you can to maximize your profits, which can then be invested to reach the end goal of your luxury retirement.

Phase four is creating passive income. Once you have your side hustles and income in check, it’s time to start looking into passive income streams.

Side hustle money doesn’t last forever. That’s why you want passive income streams so that your money can make more money while you sleep. This is why the rich get richer.

This phase is all about multiplying your cash and not chasing high returns. This is why I always talk about the importance of consistent long-term investing.

The end goal is to be on the beach, sipping a nice drink, not worrying about anything money related.

Now I do always say that no income is truly passive. Everything requires a bit of work here and there, but the idea is to get your money working for you instead of selling your time.

There is only so many jobs you can fit into one week. And that’s why trading time for money has its limits.

I was working a nine to five job plus all the overtime, flipping cars on the weekday evenings, working in a shop on Saturdays, and tutoring people on Sundays.

I actually had no more time to sell. So that’s when I started looking into ways to generate passive income through the markets.

I’m talking stocks, real estate and cryptocurrencies. Well, maybe not crypto back then. It wasn’t around, but I’m certainly interested in it now.

The stock market is probably the easiest to get involved in, especially nowadays. Maybe not when I was younger, as you had to call up your broker on the phone and do all your trades that way. Now it’s all done on investing apps.

It’s always a good idea to max out your tax advantage accounts before investing elsewhere.

I personally like to put the majority of my money into simple, low cost index funds, which are essentially baskets of stocks. And like I said earlier, I like to minimize cashflow. So I always turn on automatic dividend reinvesting.

Cryptocurrency is the second area I would focus on as it also has quite a low barrier to entry with apps like Coinbase making it easier than ever to purchase crypto coins. However, it’s definitely riskier.

I personally only have 5% of my money in well-known crypto coins, such as Bitcoin, Ethereum, and Cardona. I believe that these are the coins that will stand the test of time and I’m not prepared to take the risk of betting on a random coin that might hit it big.

Like I said before, my strategy is to get modest, passive income from the markets and make fast money from my businesses. Real estate is the last on the list and this is honestly the holy grail of wealth building. However, it is a little harder to get into.

If you’re able to save enough for a deposit on a rental property, then you can really start unlocking the power of leverage. This is because you can get a tenant to rent out the house, which should cover the mortgage, all while hopefully the house increases in value.

You’re basically getting your house paid for by someone else. Obviously the earlier you can do this, the sooner the debt will be paid and the house will be yours.

Leverage is an amazing tactic used by lots of rich people, but it can be very dangerous if not done correctly. This is because you can become over leveraged, which means if things go bad, and you can’t meet payments, your property could be repossessed.

Most people won’t tell you this, but I’m going to be honest. This step by step strategy will be hard to achieve if you don’t take your own initiative and start a profit generating side hustle.

It’s still possible with a nine to five job, but maybe not in seven years, unless you have an extremely highly paid job that is also secure. A nine to five isn’t at all bad. It’s just most people need a side hustle to kickstart that wealth building. Also just a warning from me, this is not gonna be easy.

Anyone that tells you otherwise is lying to you. You’re going to have to knuckle down like I did and work hard for a few years to have a lifetime of freedom.

After all, if it was easy, then everyone would be doing it. When you hit your first road block, and I’m certain you will, just think of it as a challenge to overcome and not as a complete disaster.

This plan will only work if you stay consistent and disciplined. I’m confident after you reach phase four, you should be in a pretty good place to achieve financial independence and retire early.

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