Today’s question comes from CJ. He asks:
I related a lot to your story. I look around the cubicles here at NBC and see a lot of older people doing what I’m doing and it scares the crap out of me.
I’ll be 30 years old in 4 weeks and make $70,000/year and live in Brooklyn with my girlfriend (28) who makes the same. We split our rent, $2,100/month ($1,050 each) and utilities. I like to say I live comfortably poor. Currently I’m not saving any money, and generally living paycheck to paycheck. We want to be able to start our own production company and work for ourselves in the next 5 years. This basically means having financial freedom. I estimate that we will both be making just over $100,000 a year, respectively, within the next 3 years.
Like I said, we have not been saving money, and have no investments or 401K or anything like that. What are the basics that we should be doing in order to save significant money over the next 5, 10, 20 years?
After taxes, I take home $3,400/month. Most of that goes towards rent, utilities, food, transportation, gym membership, etc. How much of my monthly paycheck should I realistically be saving?
I have NO CLUE how to invest my money and just want to start getting into the game.
Bronnie Ware spent years talking with people about to die, and she found they all wished for the same things: that they’d been happier, stayed in touch with their friends, expressed their feelings, and hadn’t worked so much.
Want to guess what their biggest regret was?
“I wish I’d had the courage to live a life true to myself, not the life others expect of me.”
At 30, you’ve set a big hairy goal to start your own business and reach financial freedom. The good news is you have decades left to accomplish that.
I’ve said it before, and I’ll say it again. You can get whatever you want in this life, and it doesn’t require money, it doesn’t require a degree, it doesn’t require luck. It only requires the ability to learn and to take action.
Here’s what you should do.
1. SET UP YOUR 401(K)
You can’t procrastinate on this any longer. Why not? Did you know that a third of people near retirement age will live in poverty for the rest of their lives? Or that most families entering retirement only have $104,000 saved? Trust me, you don’t want to do this to your future self.
Besides, you’re probably leaving free money on the table. Most employers offer a 401(k) match, meaning they’ll match whatever you put in (up to a certain percentage). For example, if you put 4% of your paycheck into your 401(k) they’ll match it with another 4%.
So, contact your HR department and get your 401(k) set up, and put in the minimum to get the full employer match.
2. STAY COMFORTABLY POOR
Together you earn $140,000, and soon that’ll be $200,000. Did you know a lot of people make $200,000 and still live paycheck to paycheck?
Here’s a trick I want you to use: After you get your raises, keep spending the same amount of money. Now you’re saving $60,000. That’s not just one big lottery-sized check, this is every year, forever.
You can keep that money in a savings account (I recommend automating that process), or invest it for your retirement. If you’re really committed to the idea of starting your own business, then keep it in a savings account as your fallback.
3. START YOUR BUSINESS
You shouldn’t start a business because you want some specific outcome like financial freedom. You start a business because you have to.
You see, the media likes to pretend success happens overnight for everyone, when in reality it takes 10 years of fucking insanely hard work and obsession for anyone to “succeed overnight”. If you start a business based on want, you’re going to fail.
So, if you have to start your business, then do it now. Remember, you don’t need money or a degree or luck to start a business, only the ability to learn and to take action.
In fact, you have an incredible opportunity because you work at NBC, and they do what you want to do. You can find mentors there, you can build your network there, you can learn everything you need to there, and on their dime.
It’s kind of like when I started this site. At first, I just wanted to get my ideas out there, but after two years I got interested in how I could turn it into an online business. I didn’t know anything about how to do that, but I was willing to learn and to take action.
Here’s the mistake I made. I looked at the people who were 5 or 10 years ahead of me, people with 6- and 7-figure businesses, and thought I needed to do what they were doing. I had to get professional head shots, get a logo, be on every social media platform, start a podcast, post videos to YouTube, have an email list, post new articles every week, do SEO optimization, run A/B split tests, and on and on.
That’s called tactical hell. I was in it, and it was wasting my time and energy.
I decided to focus my resources on what mattered most, and that was writing. What happened? My writing skills improved because repetition is the mother of skill. Once that skill became sharper, I could focus on the next one.
You should focus on your one thing. I don’t know what that is. It might be something like making short films. Once that skill is sharp, then you move on to the next one. At some point you’ll have the skill set to start charging for your work, and then you can make the leap full time. You won’t have to worry about money because you’ve been saving up $60,000 every year.
Starting a business will be the hardest thing you’ve ever done, and that’s why wanting isn’t enough, you do it because you have to, and because you want to to die saying, “I’m glad I did that,” instead of, “I wish I had.” If financial freedom is a byproduct, all the better.