5

Steps To Retire In 5 Years

By: Jason Fieber

 Copyright © 2018 by Jason Fieber

All rights reserved.

This book, including any parts thereof, may not be reproduced in any form
without express permission from the author.
 Disclaimer

I am not a licensed investment advisor. I am not an investment

professional. I am also not a tax professional. This book should be read
for educational and/or entertainment purposes only. I am not liable for
any losses suffered by any parties. Unless your investments are FDIC
insured, they may decline in value. Please consult with an investment
professional and/or tax professional before investing any of your money.
Any transactions I publish are not recommendations to buy or sell any
securities.
By reading this book you are releasing me from any liability due to any
and all loss you may incur, financial or otherwise. You are also releasing
me from any liability as it relates to any injury or damage, financial or
otherwise.

I offer no warranties or guarantees as to the accuracy of any information

herein. Keep in mind that stock prices change daily and can fluctuate
wildly. As such, the information you read in this book may be inaccurate
by the time it's published.

I cannot and will not guarantee that you will be able to retire in five years
by following these same steps. I'm simply offering high-level ideas that
may or may not improve your finances.
 About The Author

I'm the founder and publisher of Mr. Free At 33. I'm the founder of
Dividend Mantra. I've been writing about personal finance, stocks,
dividend growth investing, and achieving financial independence since
2011. I've written well over 1,000 articles, as well as a best selling
book:The Dividend Mantra Way. I went from below broke at 27 years old
to achieving financial independence at 33 years old by living below my
means and intelligently investing my excess capital. I then relocated to
Thailand after quitting my job and achieving financial freedom to take
advantage of geographic arbitrage and live out my early retirement
dream life at just 35 years old.

I write to inspire others to reach for their financial and early retirement
dreams.

My story and/or writing has been featured across national media,

including Today, USA Today, Business Insider, and Yahoo! Finance.
 Introduction

If you want to retire extremely early in life, or get to retirement very quickly
from where you're now at, this is your five-step guide.

You see that guy on the cover?

That's me. A young, happy, healthy, and wealthy guy.

That's me. A young, happy, healthy, and wealthy guy.

I'm jumping for joy, at a beach in Koh Samui, Thailand.

That image perfectly encapsulates what it feels like to be financially independent

and retired at a very young age. I'd know because I was able to retire in my early
30s.

My arms are outstretched and my hands are fully open, clearly showing my five
fingers on each hand.

You can count on one hand how many years it could take you to retire, and you
could count on the other hand just how many steps it could take to get there.

Many Americans will spend decades of their lives at their jobs, only to find that
they're financially unable to retire and spend their "golden years" however they
wish.

This is, in my view, not due to lack of opportunity or money. It's due to lack of
planning. There's no foresight, discipline, or action.

The guide you're reading aims to change that.

But there's more than planning and action here.

I'm going to show you how you can cram an entire lifetime of working into just
five short years of your life, greatly extending those "golden years" into... well...
almost all of your years.

Why spend decades working and just a few short years actually living?

Why not instead spend just a few short years working and decades actually
living?

Old age means your physical and mental faculties have almost surely
deteriorated relative to where they were when you're young.

That's not a time to finally start living.

Living on your terms, by your rules, should be done when you're young and
healthy enough to enjoy the full spectrum of all that life has to offer.
Let's retire at 72 years old and enjoy shuffleboard. Yay!

Or not.

You shouldn't value a year in your 30s in the same way you value a year in your
60s or 70s.

Time when you're young is worth much, much more. And you should be using
that time however you wish.

It's precisely when we're at our physical and mental peak that we have the least
amount of time to enjoy and make use of that.

They say youth is wasted on the young. Well, I say that's because the youth are
all too busy at jobs to enjoy their youth.

The traditional idea of "retirement" is done. It's over.

This guide is an all-out assault on that notion.

While mainstream media pumps out headlines about how Americans will have
to work until they're dead, I'm going in the complete opposite direction: I believe
that retirement isn't only possible, but I'm going to share how it's possible with
just a few years of vision, dedication, discipline, and hard work.

Not only that, but I believe it's possible for almost anyone.

However, this guide isn't going to discuss spending less on your daily latte. And
I won't be sharing tips on how to best negotiate with your local cable company
on how to lower your bill.

No, this guide is going to propose a radical shift in your thinking and lifestyle.

If you want extraordinary output, you need extraordinary input.

Cramming a whole lifetime of working and earning money into just a few short
years calls for nothing less than extraordinary effort.

But the end result is also extraordinary. It's very much worth that effort.

And so I'll be sharing with you five high-level steps that I believe can and will
lead to a fantastic financial situation in a very short period of time, allowing one
lead to a fantastic financial situation in a very short period of time, allowing one
to quit their job, pursue their passions, and live life on their terms.

These five steps are holistic and complementary, each one a vital piece to an
overarching road map to financial independence and the wonderful lifestyle that
confers.

If you want a house, two cars, 2.2 children, a white picket fence, and an
annual vacation at a fancy resort, this guide is not for you.

But if you want to become financially independent and retire at a very young
age, you should definitely pay attention.

First, I want to give you a little background on yours truly.

After all, if I'm writing this five-step guide on how to retire very quickly, I must
have done so myself. Otherwise, my advice isn't worth much.

I was broke and unemployed after being let go from my automotive job during
the depths of the financial crisis, in early 2009. I was a 27-year-old college
dropout who suddenly found himself without a paycheck.

I'm not an unintelligent person, yet I realized that I really had no control over my
money, life, or time. An employer controlled everything. They dangled this
paycheck in front of me, forcing me to show up and do a dance for most of my
waking hours. And when they decided they didn't need me any longer, they cast
me out.

I thought to myself, "I'm smarter than this. I'm better than this."

Determined to turn around my life, I educated myself on all things money.

What I learned was, if you don't control your money, you don't control your life.
If you don't think about money, money won't think about you.

Well, I wanted to control my life.

More specifically, I wanted to control my time.

While a lot of people go out and spend money to own all kinds of things, they
don't ever think about spending money to own the most important asset of all:
don't ever think about spending money to own the most important asset of all:
time. It's crazy, in my view, to own a lot of stuff, yet not own your own time.

And so I embarked on a multi-year journey to personal salvation, financial

independence, and early retirement.

I started that journey in the spring of 2010. And I became financially

independent in March 2016, at age 33.

I went from broke to financially independent and retired in six years.

But check this out: I could have done it even faster.

I could have done it in five years.

And I'll share some of the real-life practical and tactical strategies I personally
used to become wealthy and financially free in my early 30s. Those strategies
will be revealed throughout this guide as we move through the five steps.

I want you to know and be able to take advantage of my very best ideas in regard
to retiring quickly.

And that desire led me to putting together this step-by-step guide.

This five-step guide is the ultimate guide to going from $0 to retired in five
years.

For more information on who I am and what I've done, please

see: http://www.mrfreeat33.com/my-story/.

My blog, Mr. Free At 33, chronicles life after financial independence and early
retirement.

If you visit the site, you'll read that I grew up in a ghetto of Detroit, lost my
parents to addiction and suicide, dropped out of college, and blew through
money for most of my life.

Yet I was still able to become financially independent six years after starting out
toward that goal.

So when I say just about anyone can do this, I really mean it.
I'm nobody special. I had no inherent advantages over anyone else.

But I was determined and disciplined. There was no doubt in my mind or heart. I
had absolute dedication to quitting my job, owning my time, and controlling my
life.

I wanted to be my own boss.

I wanted to be able to wake up when I want, spend time around people I care
about, and engage in activities I'm truly passionate about.

Well, that's exactly where I'm at today.

It's a Thursday afternoon in mid-2018 as I write this. While most people are
grinding it out, I'm sitting in a coffee shop, writing, sipping coffee, listening to
music, and enjoying my life.

I'm 36 years old, in the prime of my life, able to spend my time however I wish.

Now, I cannot absolutely guarantee that you will be able to retire in five years.
I'm not you. You're not me. Maybe you're not as hardcore as I am. Maybe you
don't want it that much. Maybe you won't follow these steps precisely. And any
myriad of issues can pop up in someone's life that would interrupt this plan.

But I can say that I followed these steps myself. Every step I'm prescribing is a
step I've actually taken in life. And I'm where I'm at. I'm financially free in my
30s. So it does work.

I'm Mr. Free At 33 only because I followed a tactical plan from beginning to
end.

That plan is this plan. It's this five-step guide I'm sharing with you.

If you want to be in a similar life position, read on...

Step 1: Choose The Right Career
What is the "right" career?

When most people look at choosing a career, they usually go in one of two
directions.

The first direction is, they attempt to pick a career they would enjoy for the rest
of their lives.

We can automatically rule that out because you and I both agree (if you're
reading this book) that any one career will not be satisfying for 30 or so years,
especially when you think about living on someone else's terms (the employer's
terms) for most of your waking hours.

Moreover, if you're interested in retiring in five years, you don't need to find
something you'll enjoy for the rest of your life. You'll soon be free to choose
your activities based on their individual merits alone (in terms of happiness and
enjoyment), not how much money they will or won't provide you.

I mean, there's nothing in this world that I'd like to do for 8-10 hours per day, 50
weeks per year, 30+ years of my life.

Look, I enjoy pizza. I would even go so far as to say I love pizza.

But would I want to fulfill some kind of pizza-eating quota, whereby I have to eat
pizza for 8-10 hours per day, 50 weeks per year, 30+ years of my life? Would I
want to attend daily meetings on pizza, fill out reports on pizza, and grovel to my
boss about why I didn't meet certain pizza deadlines?

Absolutely not. I'd get tired of pizza fast.

And the same goes for any job or task I could think of, especially if it's not on
my terms.

The second direction is, they attempt to pick a career that will allow for the most
amount of money.

This line of thought is probably just as bad as the first direction.

If money is the main driver for any decision you make in life, you'll soon find
yourself hollow and miserable.
yourself hollow and miserable.

While this direction could actually lead to financial independence quickly, if

approached correctly, the same people who choose careers based on maximum
earnings potential almost always choose to live lifestyles that consume all, or
even more, of that income.

So they never end up free. They end up chasing the buck, exhausted, until they're
old and used up.

The direction I propose is a third path.

It's a mixture of the two aforementioned directions.

Choose a career that you can at least stand on a daily basis for a five-year
stretch. And make sure this career can allow you to earn at least $50,000
pear year (in 2018 dollars).

You don't have to love it, nor do you have to make big money.

But you do have to enjoy it enough to not quit after a year. And you have to
make enough money so that you can save and invest your way toward early
retirement.

Furthermore, this won't be a "career" at all. It'll just be something you do for five
years so that you can buy the rest of your life out.

My "career" was in the auto industry.

I was a service advisor.

My first service advisor position was in May 2006. And I quit my job -
permanently - in May 2014, just after turning 32 years old. So it was eight years,
the last three of which were kind of terrible.

I was basically a liaison. I was the go-between. I communicated client concerns

(regarding their vehicles) to technicians. And then I communicated complex
repairs and solutions to clients, ultimately seeking their approval on said repairs
and solutions (which often meant a client was paying a lot of money).

I was the guy you saw whenever you brought your car in for any type of service
or repair. It was akin to being a dentist - nobody wanted to see me. Nobody
wanted to spend a bunch of money on brake pads the same way nobody wants to
spend money on a filling.

It was not the most fun job in the world, nor do I think any job is great.

But I averaged about $50,000 per year for the last few years, which was when I
was aggressively saving and investing my way toward my early retirement.

This job didn't require a college degree (I don't have a degree). It didn't require
any specialized knowledge.

You simply had to show up for 10-11 hours per day, work really hard, handle
logistics, and clearly communicate.

I worked over 50 hours per week. I dealt with technicians who hated their jobs,
sold the value to clients who didn't want to see me, and competed against
coworkers who wanted to steal my clients.

But it was all worth it, because the money I earned from this job allowed me the
capital necessary to secure my financial future (by way of investing, which we'll
discuss later).

You should think of your "career" as a means to an end.

You're selling your time and skills for money. That's it.

This exchange of value should be done in the most advantageous manner for
you, meaning you should choose a job that isn't completely terrible and pays
enough to get you to financial independence as soon as reasonably possible.

A job should be a pipeline of oil and cash that you stand in front of - you get a
little dirty, but you're also "cleaning up" with all of that money that you can use
to buy your time and freedom.

If you're already knee-deep in your career (which I assume you are) and you're
not happy with your job (which I assume you are, if you're reading this), you'll
simply want to maximize the earnings potential that job holds. Wring out every
single penny you can.

That means showing up early, leaving late, and going out of your way to please
That means showing up early, leaving late, and going out of your way to please
the people (your employer, boss, clients, whomever) that has a say in how much
money you make.

I did all of that. I showed up way before I had to. I stayed past closing. I said
"yes" when a "no would have sufficed. I made sure I was noticed.

As a result, I moved up to a more luxury line of vehicles (from Volkswagen to

Audi) when a promotion was available. More expensive cars means service and
parts cost more, which translates into a higher commission (I was paid largely on
commission) check when I was paid. I leveraged every minute I could to
maximize earnings potential while I was at the job.

If you don't already have a job, or if you're in a state of transition right now,
there are a number of careers that you can jump into without a college degree
and make $50,000 or so per year - pretty much right out of the gate.

You might need charisma, creativity, drive to get some of these jobs and make
good money.

But if you're reading this guide, I'll assume you have all of that in spades.

Here are five ideas:

Real estate agent

Truck driver

Salesperson (which is essentially what I was)

Construction worker

Oil & Gas laborer

There are countless niches out there to get into, work hard, and make some real
money. And if you have physical skills in a trade (like, say, in home repair,
welding, electrical work, or plumbing), all the better.

There are also numerous high-paying jobs that require some kind of certification
(but not a degree). The automotive technicians I used to work with (some of
which made a lot more than I ever did) are a good example. Becoming a
personal trainer is a great way to get yourself in shape and make some money -
no college degree needed.

Making $50,000 per year isn't such a high hurdle that an everyday American
can't go out and make that. There are so many opportunities out there, folks.
That's why I'm proposing this path - almost anyone reading this book can go out
and make this happen.

And this $50,000 is basically the minimum amount of money that I believe you
should be earning in order to follow this guide to its conclusion and retire in five
years (assuming you're starting from $0). Of course, more is better, but I don't
think you need to earn a lot more than this in order to fulfill the five-year plan.

Furthermore, a job that can allow you to make this money shouldn't require
every waking minute of your time, which allows you some free time to leverage
and take advantage of. This spare time will be of great use when it comes time to
implement later steps.

You don't even need a degree to make this money, which sets you up nicely to
retire very early (because you won't have student loan debt to contend with). In
fact, not going to college may be the best move at all (at least in the USA where
education is often expensive).

And you don't have to love your job with every ounce of your heart when you
only have to devote a few years of your life toward the endeavor.

I've heard people say you should do what you love, then you never work a day in
your life.

Well, doing what you truly love might not pay a lot - or anything at all. And
while you might love your job, your job might not always love you. You could
enjoy what you do perfectly fine but still not be happy, especially if you're not
free to do it on your terms. Plus, enjoying your job is a lot easier in the first year
or so than it is in the 20th year or so. Lastly, I don't think there's anything I'd
love to do over and over again for decades of my life. That task doesn't exist.
Period.

I'd rather have financial independence and not need it, than need financial
independence and not have it.

I can tell you it sure would have come in handy when I was let go from my job
I can tell you it sure would have come in handy when I was let go from my job
during the greatest economic disaster my generation has ever seen. Even if I had
loved my job back then (which I didn't), it sure didn't love me.

But if you're able to retire at a very early age, you can pick and choose your
opportunities as they suit you.

You can do what you want, when you want, with whom you want.

That's real power. That's real wealth. That's real happiness.

That's freedom.

But you first need the regular source of income. You can't build your early
retirement plan without money.

So make sure whatever job you choose to do for your five-year plan pays you
enough (again, $50,000+ annually) to get to the promised land.

Then start saving most of that money immediately, which we'll discuss next.
 Step 2: Track And Minimize Expenses

This step is absolutely critical.

What people often don't understand is the role that minimizing expenses plays in
being able to retire early.

I'll give you two scenarios to quickly illustrate this.

John nets $100,000 per year but he spends $90,000 annually. John will never
retire. Don't be like John.

Jennifer nets $50,000 per year, but she only spends $20,000 annually. Jennifer
will probably be retired inside of a decade. Be like Jennifer.

Lifestyle inflation is like a parasite that eats your money and, with it, your
freedom.

Mo' money, mo' problems.

Or mo' money, mo' saving, investing, and opportunities.

Approaching it the second way is obviously far superior - and it's this mindset
that will truly free you.

This step will require you to get up close and personal with frugality.

In order to go from below broke to financially independent as fast as I did, I had

to routinely save well over half of my net income. That's right. I saved over 50%
of my net income... for years. And I still spend less than half of my income, to
this day.

In fact, I often saved over 60% of my net income. And there were even a number
of months where I saved over 70% of my net income.

I will share with you some strategies I personally used to accomplish this.

Before we break those strategies down, though, I want to point out the very first
Before we break those strategies down, though, I want to point out the very first
thing you should be doing: tracking expenses.

You need to track every single penny.

You have to know exactly where every red cent is coming from and where it's
going to.

Knowing and controlling every single expense is vital in regard to minimizing

expenses, because if you don't know what you're buying or how much you're
spending, you can't possibly be in a position to change or improve your situation
and save toward your early retirement.

Not knowing every expense would be like standing on a leaking ship and being
asked to plug holes... without having any ideas where the holes are or how large
they might be.

Not knowing every expense would be like taking a trip... except you don't know
where you're starting, nor do you know where you're going.

People are often very familiar with how much they're earning.

If someone were to come up to you and ask you how much money you made last
month, I'd be willing to bet you'd be able to answer that question fairly quickly
and accurately.

However, if someone were to come up to you and ask you how much money you
spent last month, I'd be willing to bet you wouldn't be able to answer that
question fairly quickly or accurately.

You need to change that. Immediately.

I've used www.mint.com to track my expenses for years. It's free software that
allows you to easily track, handle, and improve your monthly budget.

Open it. Learn it. Use it.

Getting back to tactics, these are strategies that you'll want to adapt to your own
situation if you're really serious about retiring quickly.

My focus has always (and remains) on what I call the "big three".
My focus has always (and remains) on what I call the "big three".

These are the three major expenses that most people tend to spend most of their
money on.

If you look at an average consumer's budget, you'll see that these three budget
lines account for most of their spending.

These three categories are: housing, transportation, and food.

It is vital that you spend as little as possible on these three categories. The rest of
your budget will more or less take care of itself.

My biggest hack for housing, at least as it pertains to the US, is to rent a

cheap and small apartment that's located outside of a major/expensive city.
Renting a room in someone else's place is also a very viable idea, especially
if you must live in or near a major/expensive city.

If you want to live in NYC and/or buy a house, go for it. But you'll almost
certainly remain beholden to a job and a paycheck for most of your life.

If you want to "get out of Dodge" fast, don't buy a house. And don't live in some
monstrosity of a city that will tax and expense you to death.

The median cost of a house in the US (as of the summer of 2018) is around
$200,000.

If you spend $200k on your accommodation, you're done. Hand in that

retirement card and get ready to work for the man for a very long time, because
you'll have to in order to pay off that debt (which will be way larger after
accounting for interest).

Plus, a house comes attached with a cascade of related expenses that will drown
you - insurance, maintenance, repairs, HOA dues (where applicable), taxes, etc.

Don't do that.

There's a better way.

I'll tell you what I did.

I was living just outside the Metro Detroit area, in Michigan, in the spring of
I was living just outside the Metro Detroit area, in Michigan, in the spring of
2009, back when I was let go from my service advisor job.

The auto industry was in turmoil back then. This was the Great Recession. And
the epicenter for the automotive industry troubles was Detroit - where the "big
three" (see what I did there?) domestic automotive manufacturers were
headquartered.

Well, I saw the writing on the wall. I decided to "get out of Dodge" and leave
Michigan, its troubled economy, and state income taxes behind.

I moved to Sarasota, Florida in the summer of 2009 for a number of reasons.

This "geographic arbitrage" was a massive boon to my eventual financial

success.

First, Florida doesn't have any state income tax. Michigan had, at the time, a
4.35% state income tax rate. There's a personal exemption to factor in, but
~$50,000 in income puts you at an effective tax rate near 4%.

State income tax is something that, to my disbelief, most Americans seem to

overlook. All else equal, you're far better off living in a state that doesn't impose
a tax on your income. I mean, I got a 4% raise right off the bat - and Michigan's
state income tax rate isn't even as high as many other states (hello California,
Hawaii, and Oregon).

People like to point to "other taxes", as if you won't come out ahead when you
live in a state with no income tax. Well, that's just not true, especially if you rent
(because you won't have property taxes to worry about). I have firsthand
experience in this.

Moreover, high-tax states (like California, New York, and Hawaii) are often
very expensive places to live in general. Meanwhile, many of the states with no
income tax at all (like Florida and Texas) offer many low-cost options for living,
along with robust economies and opportunities for jobs. And setting up
residency in a state with no income tax will be extremely beneficial for the last
step of this guide.

Check this out: sales tax was the same in both areas (comparing the metro
Detroit area to Sarasota, Florida). So I broke even there. And Florida doesn't tax
groceries, which was always my biggest area of consumption tax exposure.
Plus, rent was actually cheaper in the Sarasota compared to the Ann Arbor area.

So I saved on rent, saved on income tax, and broke even on sales tax.

Oh, and I was now living in a more dynamic economy (not so focused on
manufacturing and automotive), which meant I could more easily get a job. And
the jobs paid more!

I landed a job within weeks of moving to Florida. And my income was higher
than what I was making at my last job. The job I was let go from was paying me
about $35,000 per year. I was making about $40,000 per year right out of the
gate in Florida. And since Sarasota attracts wealthy retirees from all over, I knew
I'd always have an opportunity to serve that clientele and make money.

Getting back to housing, I eventually moved into a dated two-bedroom condo

about 15 minutes outside of downtown Sarasota.

Did I have stainless steel appliances, beautiful hardwood floors, and an ocean
view?

No.

I had old, white appliances. The beige carpet was stained in numerous locations.
And my balcony overlooked a parking lot. This was not luxury living.

But it was cheap rent. The place was $900/month. And I shared that with my
significant other.

I would have moved into a one-bedroom apartment/condo, but my significant

other (who I was with for many years) has a son who lived with us during this
period. So I didn't have much of a choice. Still, splitting rent down the middle
meant I was paying just $450/month for rent.

If you're going to go out and make $50,000 per year, it's imperative that you
spend as little as possible on rent. You need to rent cheaply. I mean, cheap,
cheap, cheap!

Your housing will likely be the biggest single monthly expenditure. The lower
you can get this, the better off you'll be. And the faster you'll be able to quit your
job and retire. Likewise, the higher this expense is, the longer you'll be working.
They're correlated very strongly.
They're correlated very strongly.

You'll want to get creative here. And forget about living in some nice pad that
you'll be proud to show off. Getting stuck in the consumerist/showoff mindset
will not free you.

The overarching master plan (which we'll get into later) means you won't be
living here forever. So don't worry about how you'll feel about living here in a
decade. Just get a roof over your head that allows you to be reasonably
comfortable and safe.

By the way, not buying is extremely important.

A house is, in general, a bad idea. It's unlikely you'll actually come out ahead
versus renting cheaply.

Houses are too big, too cumbersome, and too expensive. Houses are difficult to
right-size, which means more square footage to pay for, heat/cool, clean, and
furnish. They're designed to be filled up with crap you don't need, while
simultaneously emptying your wallet of the cash you do need.

And they cost a ton of money to get into and get out of.

This is especially true within the context of what we're talking about here.

Because you'll only be living here for a few years, the transaction fees that you'll
have coming and going in such a short time frame will eat you alive. Just don't
do it.

Do. Not. Buy. A. House.

Transportation is the second expenditure category that you'll have to hack.

My biggest hack for transportation is to not own a car.

I grew up in Detroit. This is "motor city". Buying/owning a car is practically a

rite of passage.

And so owning a car became an indoctrination that I never actually questioned in

terms of practicality or necessity.

But once I became enlightened about money, life, time, and freedom, I realized
But once I became enlightened about money, life, time, and freedom, I realized
the car was an albatross around my neck. It was this huge weight that held me
back and sucked the life, freedom, and money from me.

The auto industry sells a car as something that allows you freedom - go
anywhere, anytime. Just jump in a car and do what you want.

Well, a car is the opposite of freedom.

Sure, a car allows you to go to places.

So do your own two feet. So does public transportation. So does a bicycle.

But owning and operating a car comes with a set of bills. Think car payment,
insurance, gas, maintenance, repairs, tag fees, license fees, etc.

These bills keep you chained to a job so that you can afford a car to get to the
job.

It's this neat trick of a catch-22. And it's not freedom. It's anti-freedom.

Numerous bodies of research show the average American household spends

something like $9,000 per year on transportation. If you do the same, you won't
retire early. Simple as that.

Every expense you have should be thought of in terms of how much capital
you'd need in order to spit out the passive income necessary to cover that
expense.

My dividend growth stock portfolio, as of this writing, is valued at

approximately $360,000. You can find that portfolio (which is updated monthly)
here: http://www.mrfreeat33.com/portfolio/

The portfolio, which I call my FIRE Fund (because it allows me FIRE, or the
ability to be financially independent and retired early), generates approximately
$12,700 in dividend income per year.

So we're talking an approximate yield of 3.5% (12,700/360,000).

If I take on an annual expense of $9,000 (that average American household

transportation cost), I'd need a portfolio of almost $260,000 yielding 3.5% in
order to generate the passive $9,000 to offset that cost.
order to generate the passive $9,000 to offset that cost.

This is how you should think about every expense in your life. You should
look at an expense not at its face value; instead, you should think about how
much capital would be necessary to offset that expense via passive income.

I'll give you a very small example of how powerful this mindset it.

Let's say you have a $100/month expense.

Sounds innocent, right?

Well, it's not.

If you have $100/month in ongoing expenses that you can't rid yourself of, you'll
need to have assets of almost $35,000 yielding 3.5% (1,200/0.035) in order to
generate the passive $1,200 per year you need to cover that expense without
going out and actively earning that money at your job.

$100/month is now $35,000.

That's how it really is.

So if you have, say, a gym membership that runs you $100/month, you should be
asking yourself whether that membership is actually worth 35,000 dollars,
because that's what it's costing you.

I'll now tell you how I solved transportation.

I sold my car in the summer of 2011. And I've largely operated without a car
ever since.

I rode the bus to/from work, for years. And I walked (and still walk) whenever
possible. Walking is, in my opinion, the best way to get around. You get to
interact with the world around you. You become more aware of your world. It's
cheaper, healthier, and more enjoyable than being stuck in a metal box in traffic.

The move to Florida was also helpful in terms of transportation.

I had Florida's great weather in mind when I was thinking of living without a car.
Well, walking around and/or waiting for a bus is more enjoyable when it's 80
degrees outside versus 30 degrees outside. That is for sure.
degrees outside versus 30 degrees outside. That is for sure.

The fact that Americans are notoriously overstressed and overweight has at least
something to do with the fact that they are constantly stuck in traffic,
transporting themselves around not by use of their own two feet (via walking or
bicycling). Europeans walk and bicycle a lot more. And they're happier and
healthier for it. Go figure.

In fact, I currently (as of mid-2018) do not own a car.

And I even let my driver's license expire, because I don't plan on ever again
owning a car. I could have unlimited money, yet I'd still not own a car.

Getting rid of my car supercharged my saving and investing, allowing me a lot

more capital to invest toward my financial independence and early retirement.

And I simultaneously needed less capital and passive income in order to free
myself.

Plus, I enjoy my commute/travel so much more. I'm not stuck in a metal box,
surrounded by traffic. I instead take a five-minute walk down to my local coffee
shop, which serves as my "office".

My walk allows me to be one with the world (the trees, the people, the
architecture) when I move myself around. And I'm much healthier, wealthier,
and happier for it. And I'm now "alive". It's not just getting to/from work in the
fastest way possible. It's about living and enjoying this incredible world.

When you spend less, you need less capital and passive income to with. And
spending less means you can build that asset base and passive income faster.
It's a two-sided benefit that greatly speeds up the timeline to retirement.

Spending less works both sides at the same time.

It's as simple as that.

The last of the "big three" is food.

My biggest hack for saving money on food in the United States is to not eat
out at restaurants. You must eat at home almost 100% of the time.

Restaurants in the States can be insanely expensive.

Restaurants in the States can be insanely expensive.

Whatever you might want to eat is likely to cost at least three times as much at a
restaurant. That's because you're paying for their rent, their chefs, their waiters,
their cashiers, etc.

And then you have to factor in the taxes, which will surely hit you on your bill
(but likely not on your grocery tab). This is disadvantageous to you.

Oh, and there's the tipping, too. You're paying much, much more for the food,
then you have the "privilege" of paying an additional 20% on top of that.

Look, I was a waiter in college. I know how hard that work is. Because a
waiter/waitress usually earns a very low wage, the tips are the lifeblood of that
industry. A tip is not something I'd ever argue against.

However, what I would argue against is visiting a restaurant at all.

Just don't do it.

Buy your food at the grocery store. Then cook and eat it at home.

You save the tip money. You save the huge premium on the same dish. And you
save the transportation costs and everything else.

Plus, you get to control your portions and input, which will probably lead to
greater health benefits. This is compared to restaurant portions, which have,
frankly, gotten out of control.

I rarely ate out while I was saving and investing toward financial independence.
It was too difficult to justify the extra costs.

I understand the enjoyment of having someone else cook you delicious food,
serve it to you, and clean up after you. I truly do. I can appreciate that. But there
will be a time for plenty of this... after you're retired (which I'll get into later).
Have patience.

The only reason I visited restaurants at all, ever, was because my significant
other practically demanded at least an occasional dinner out of the house.

In fact, I ate ramen noodles for lunch for a year straight. I would pack ramen
In fact, I ate ramen noodles for lunch for a year straight. I would pack ramen
noodles - and ramen noodles only - for my work lunch.

While my coworkers were going out and eating burgers, pizza, or sub
sandwiches, I was sitting in the lunch room eating my microwaved ramen
noodles. While they were spending ~$10 on lunch, I was spending 20 cents.

They might have snickered at me then.

But guess who's laughing now?

They're still at the jobs they dislike, still running down and spending $10 on
lunch, and still forced to live a life not on their terms.

Meanwhile, I don't have any of those problems.

Mo' money, mo' problems?

I don't think so.

This mindset should be extrapolated and applied to every expense in your life. If
it's not absolutely necessary, minimize it. Better yet, eliminate it.

Every additional dollar you're spending now is one less dollar you have to invest
toward your freedom.

Well, kind of.

It's actually a lot worse than that.

Seriously.

See, a dollar isn't a dollar.

A dollar saved is more than a dollar earned because of the effect of taxes.

It takes you $1.20 or so (depending on your tax situation) earned in order to

actually extract $1.00 of savings out of that.

Plus, there's the costs of commuting to/from and maintaining your job:
transportation, uniform(s), meetings, social gatherings, food, etc.

And then you have to factor in the non-financial resources (time, stress, costs)
And then you have to factor in the non-financial resources (time, stress, costs)
you expend when you prepare for work, travel/to/from work, and actually
perform your job in order to make that dollar (or ~$1.20, more accurately).

Furthermore, a dollar saved today that's invested at an 8% annual rate of return

turns into approximately $10 after 30 years.

So when you spend $1.00, you're not spending $1.00. You're spending way,
way, way more than $1.00.

The present-day you might think squandering away just $1.00 on something isn't
that big of a deal, but it's closer to $10.00 wasted after factoring in your
opportunity cost.

The future you would love to reach through time and smack you upside the head,
showing you how much that $1.00 could purchase (both in terms of goods and
time/freedom) in their future timeline.

Don't overlook this step. This step is arguably the most important step of all.

I'll tell you how important it is...

Your savings rate will almost completely dictate how fast you retire.

Because five years isn't terribly long for the power of compounding to work its
magic (which we'll discuss soon), the amount of capital you're able to put aside
and save will be the vast majority of what your investment portfolio is able to be
comprised of.

You'll need to know your net savings rate.

This is deduced by taking your net income and subtracting out total expenses,
then dividing that number (your savings) by your net income. You should have
all these numbers handy after tracking every penny in and out.

Say you earn $3,800 in net income this month. And you spend just $1,200 of it.

You subtract $1,200 from $3,800. You arrive at $2,600. That's your savings.

It's then $2,600/$3,800, which is 68.4%.

This is, by the way, a pretty apt example, because you'll might be earning
This is, by the way, a pretty apt example, because you'll might be earning
something along these lines, and you'll have to spend this little in order to get to
the promised land quickly.

As I noted in the introduction, I routinely saved over half of my net income. I

actually saved over 70% of my net income many times over the course of my
six-year journey to financial independence and early retirement.

If you want to be able to retire in five years, you should aim for a 70%+ net
savings rate.

The next step will discuss a method to increase the income side of that ledger, in
order to push you over that 70% hump (and quite possibly get you way over
70%).

Be very, very thoughtful about every dollar you spend.

Eliminate expenses wherever possible. Minimize the rest.

Focus on the "big three" first and foremost, which is where the biggest returns on
your investment of time and focus will come from, then extrapolate that out to
the rest of your spending once you've fully got those expenditures under control.

And keep in mind that a dollar not spent is much, much more than a dollar saved
and invested after you account for taxes, effort, time, and compounding.
 Step 3: Develop A Side Hustle

By now, you've got your job making pretty solid (but not remarkable or
unattainable) money.

You have your expenses fully under control.

You're showing up to your job, enjoying it as much as possible, and working

harder than everyone else in order to make the most of your time there.

And you're going home to your small and rented abode, which you arrive to and
from by bus (or by your own two feet, or by a bicycle).

You're eating at home for pretty much every meal.

And you're watching that bank account grow like a weed.

Awesome stuff.

But it can and will get even better.

That's where this third step comes in.

Your job will likely not suck up all of your available time.

And because you're not going out and partying it up with everyone else who's
blowing through their money (which is imprisoning them to their jobs), you have
a lot of excess time that you can use to your advantage.

Plus, by virtue of who you are (based on you reading this guide and having an
Plus, by virtue of who you are (based on you reading this guide and having an
interest in a different life path), you're a driven, intelligent, and creative person.

Well, it's time to leverage all of that.

You now need to develop a side hustle that's both highly enjoyable and
easily monetized.

A side hustle is a part-time gig that you can allocate spare time to. It's a hobby of
sorts that can earn you some spare cash. This spare cash can be used to further
increase your savings rate and accelerate the journey toward early retirement.

I'll give you five quick examples of profitable and enjoyable (depending on your
personality, skills, interests, etc.) side hustles:

Writing/blogging (my personal pick)

Web development

Selling crafts/goods online

Airbnb renting

Uber driver

Each of these side hustles can earn you quite a bit of money - anywhere from an
extra $100 per month to significantly over $1,000 per month.

It depends on how good you are at it and how much you devote toward the craft.

There are hundreds of side hustles you could get into and make a little money on
the side.

Writing has been my side hustle of choice.

I started a blog, Dividend Mantra, back in early 2011 to document my journey

toward financial independence and early retirement.

I would track every monthly budget, stock purchase, and challenge faced (and
overcome) in real-time for the world to see.

It didn't make a lot of money at first. Actually, it didn't make a lot of money for
It didn't make a lot of money at first. Actually, it didn't make a lot of money for
most of the time I ran it. It took me a long time before I even cracked
$100/month.

But it was a little extra cash. And it started to earn me some pretty decent
income over the last year or so that I ran it.

Later, I was able to add on to the blogging with freelance writing, which greatly
increased my income potential.

In fact, I was earning north of $5,000 per month four years into things. This
greatly reduced my timeline to early retirement, while simultaneously
significantly increasing my savings rate.

My expenses were basically locked down, which didn't allow for much more
improvement on that side of the ledger. But by increasing my income to a large
degree (after already minimizing expenses as much as I possibly could), I was
able to save and invest a lot more money.

However, it's not just the money we're talking about here. The money is actually
a small part of the big picture.

The side hustle, the writing/blogging, was something that I could pour my
happiness, creative energy, and spare time into.

This is incredibly powerful.

A side hustle distracts you from the more mundane aspects of this five-year
journey.

When you're depriving yourself of a lot of things that your peers might be
enjoying and bragging about (weekends out on the town, new houses, etc.), you
might feel "left out". While the eventuality of early retirement is more than
worth the stretch (and worth much more than whatever it is your peers are
currently buying), it's tough to see the light in the middle of darkness. A fun side
hustle keeps you engaged, happy, and focused on something else.

Simultaneously, you're earning money that should be able to get you to your end
goal that much faster, making the potentially mundane journey that much shorter
and easier to swallow.

Plus, it's a possible major business idea that could turn into something big down
Plus, it's a possible major business idea that could turn into something big down
the road.

While your job has limited prospects in this department (a job will almost
always be just a job), the entrepreneurial spirit you pour into a part-time project
has the potential to turn into a viable and serious business.

At the very least, this side hustle should be something that you enjoy enough to
do even when you're retired from the full-time job and all of which that comes
with.

And it should be something that you'd likely continue to enjoy in some form or
fashion past the point of retirement, which serves to bolster your enjoyment of
post-retirement life, all while adding a little extra income to reinforce whatever
passive income your investments are providing for you.

It's a one-two punch that I would strongly recommend to not consider going
without.

I noted in the last step how we might be able to move you past the 70%+ savings
rate hump.

You might be able to cut your expenses down to the bone. But there's then only
so much you can do with that. Once you have the low expenses totally locked in,
it's time to increase your income as much as possible, with thus improves your
savings rate and speeds your journey.

Well, this is one big part of that (with the other part coming in the next step).

Using that earlier example of a ~68% savings rate, moving that same net income
number from $3,800/month to $4,300/month (assuming netting $500/month
from a side hustle, which shouldn't be terribly difficult), you increased the
savings rate from 68.4% to 72.1%.

You just moved over that hump.

And $500/month compounding at 8% over the course of, say, four years
(assuming you develop your side hustle to this point of income after one year)
turns into an extra $28,000 that provides that much more firepower, capital,
passive income, and freedom for you.
In addition, that's $500 less you need from your investment portfolio/passive
income in order to be free of your job and retired, living on your terms.

Every dollar you can earn from a side hustle/hobby puts that much less stress on
your investment portfolio, all while simultaneously making that portfolio larger,
faster.

A side hustle speeds up the journey to early retirement through two

mechanisms: you're saving and investing at a faster rate, and you're setting
yourself up to need less capital and passive income to live off of and retire.

Plus, you're putting yourself in a position to enjoy your time both during the
journey and in post-retirement life much, much more.

You're still contributing to the world, making a little active income, and making
use of your tremendous talents.

I can tell you, as someone who quit their job at 32 and hasn't had a job in years,
the idea of just sitting on a beach or something, all the time, at a very young age,
gets old fast.

The "traditional" idea of retirement is completely outdated within this

context, because you won't need a lengthy (perhaps decade-long) period of
unwinding and relaxation after 30+ years of your life spent expending
yourself for "the man".

If you're intensely working at a job for just five years of your life, you'll have the
rest of your life to enjoy, customize, and dedicate toward passions and pursuits
that most matter to you.

Well, a side hustle should be set up with this long-term goal in mind.

And you can even go after multiple side hustles, simultaneously. You're not
limited to just one.

But don't go after multiple niches just because you can. Only do that if you
believe you can add value, enjoy, and make a little money from more than one.

The odds are, in my opinion, better that you'll be better off if you stick to just
one, especially considering that you'll be working a full-time job at the same
time.
time.

Now, two side hustles I listed are seemingly at odds with some of information
I've already shared.

Those two side hustles are: Airbnb renting and Uber driving.

Well, Airbnb will only work for as long as you rent a two-bedroom apartment
(instead of a one-bedroom or, preferably, studio apartment) and the math dictates
that you're better off with having an extra bedroom and renting it out in this
manner. Also, local licensing, regulation, zoning, and your lease (in regard to
sublet) should be considered.

Another way to accomplish something like this is to simply get a roommate. You
rent a larger apartment and, instead of doing the Airbnb thing, you rent out the
second room.

Again, the math will dictate the better choice (smaller space versus bigger space
that's shared), which will largely depend on local market dynamics. You might
just be better off being the person who instead becomes the roommate in
someone else's space - which greatly reduces your liabilities and responsibilities.

The Uber driver idea is only for those that absolutely, positively cannot do
without a car.

If you must - I repeat, must - own a car (which is only in rare circumstances),
this side hustle should be strongly considered as a way to offset the costs of that
car and get you closer to your early retirement.

Of course, you should be driving the cheapest and oldest car that will qualify
you as a driver. And you should be driving a car that gets the best gas mileage
possible. If it's new(er), red, and has an engine with more than four cylinders,
forget it.

Tangentially, any type of part-time delivery gig will also suffice here.

I've read of many stories where full-time workers in the corporate world would
deliver pizza at night in order to get extra money to pay off debt or help out with
household bills. These people weren't looking to retire early, but there's no
reason you can't apply that idea for this goal.
All that said, I would advise looking at a side hustle that can be transported
anywhere in the world, which means you'll be taking advantage of the
massive power, income, and flexibility the Internet can provide for.

The Internet wasn't even really a thing when I was in high school. And I'm not
even old - yet.

The opportunities this provides for are immense, and you should not pass these
up.

There are so many gigs you can do online, it's not even funny.

Graphic design, coding, web development, completing surveys, writing, affiliate

marketing, blogging, FBA, brand strategy...

The list goes on and on.

And if you're able to take advantage of an online presence, you'll probably be

able to leverage this much more effectively than any side hustle that exists in the
physical world.

Plus, the income potential is arguably greater.

But the most pertinent aspect of this is that you can transport it with you,
wherever you go in retirement (which will be discussed with much greater depth
in the last step).

Because the last step will involve a relocation, any side hustle that is limited to
your local physical space will be difficult, if not impossible, to take with you.
And if you enjoy it, that's a problem.

Again, there's no reason you can't rent a room and develop websites. More than
one side hustle is possible.

But if you're to concentrate on just one, I'd pick a side hustle that is possible to
do from anywhere in the world. A side hustle that requires nothing more than a
laptop and wifi is really the best option of all, in my view.

Don't let the explosive growth of the Internet pass you by.

Pick something interesting to you, spend some spare time with it, and develop it
Pick something interesting to you, spend some spare time with it, and develop it
to the point to where you're good at it and can monetize it.

Then save that extra income, increase your savings rate, and enjoy the ride a bit
more.

This extra income will greatly help when it comes time to invest, which will now
be discussed as we move onto the fourth step.
 Step 4: Invest

(First, another disclaimer. I'm not a licensed financial advisor, asset manager,
or tax professional. No text in this guide should be construed as investment
advice. I will not be recommending specific stocks or investments. My personal
investments are not endorsements of any kind. Furthermore, this guide is
designed to capture the highlights of each individual step, serving as a broad
and inspirational outline of a lifestyle. Each step could be a book in and of itself.
This is especially true for this step. Investing is highly nuanced and complicated.
Please don't invest any of your money until you have a firm grasp on what you're
doing. And please seek out further reading on this subject.)

You need money to make money. You can't invest what you don't have.

We all know that. It's Investing 101.

If you want to invest money, generate passive income, and compound your
money, you first need to have money.

Well, the first three steps were designed to set you up with the lifestyle needed to
produce the upfront and ongoing capital necessary to regularly invest.

You should already have quite a nice chunk of change by the time you've fully
optimized your life to get to this point. And that chunk of change should be
rapidly growing by the week.

However, that money won't do you much good if it's sitting in the bank,
collecting dust.

That's because inflation will slowly eat away at your purchasing power.

Interest rates are appallingly low as of the time of this writing (the summer of
2018).
Meanwhile, US inflation is running at somewhere around 2%.

If your money is not growing faster than that rate (preferably much faster),
you're being slowly drained of how much money you actually have in terms of
what that money can go out and buy for you - which includes your time.

But if you can invest your money appropriately and compound it at a fairly high
rate (say, at least somewhere in the upper single digits), your wealth, purchasing
power, and passive income will all exponentially compound.

And it's compounding that's really at the root of this conversation.

Let's say you have $10,000 today.

And let's say that $10,000 is earning 1% compound interest in the bank.

Under those circumstances, that $10,000 will turn into just over $11,000 in a
decade.

However, 2% inflation means that money is worth less in a decade than it was 10
years prior, because the cost of goods have been growing over that same time
frame.

If that aforementioned 2% inflation rate keeps hold, that $11,000 you now have
will actually be worth less in terms of purchasing power (what it can go out and
buy) than the $10,000 you started off with!

You lost money. Not good.

But let's say that same $10,000 is invested in an asset class that compounds at a
real rate (factoring in inflation) of 7% (the long-term real rate of return from the
US stock market) over that same decade.

You now have $20,000.

You've doubled your money.

Not only that, but I've already factored inflation into this, meaning your
purchasing power has also doubled. Whatever $10,000 could buy you today, you
should be able to now afford twice as much a decade from now (under these
circumstances).

These same concepts translate to your passive income.

You absolutely have to generate passive income if you're to quit your job and
live life on your terms.

You'll have bills. You'll always have bills.

You have to put a roof over your head. You need food in your belly. You need
electricity, access to entertainment, transportation of some kind, and everything
else that makes life possible and worth living.

These things all cost money.

But if you're without a paycheck (because you've quit your job and retired),
you'll need to supplant that source of income with passive investment income.

This is what the truly wealthy people do. They don't go down to a job and grind
it out. They live off of yesterday's work and earnings. They work once and earn
forever. They have assets/passive income that allows them to pay their bills and
live their lives however they want. Whatever work they do, if they work at all,
will be at their discretion.

Old money becomes new money. Old money actually becomes more than new
money, because it's compounding itself at a steady rate, turning a dollar of today
into the two dollars of a decade from now.

Money never eats, sleeps, gets sick, or complains. It works 24/7. It's a machine.

You want that machine on your side, working for you (so you don't have to).

Intelligently investing and producing passive income from your capital is

critical to retiring early.

Not only that, but you want your passive income to regularly grow, due to the
inflation dynamics I just noted.

If you're producing $15,000 in annual passive income against $14,000 in annual

expenses today, you're good. You've covered your lifestyle with passive income,
rendering yourself financially independent.
rendering yourself financially independent.

But what about when that $14,000 in annual expenses grows to $20,000 over
time after inflation increases the costs of everything you're paying for?

Inflation surely won't go away. Plus, you have to worry about any "lifestyle
inflation" (eating nicer/more expensive food, living in a nicer/more expensive
place, frequent travel, etc.) you may find yourself bumping into over time. And
then there's the aging body and healthcare costs you might run into down the
road.

There are any myriad of issues and life changes that could, and most likely will,
cause you to spend more money 5, 10, and 20 years from now than you're
spending today.

If you can't grow that passive income to at least (and preferably more than) that
$20,000 annual mark over the same period of time shown in the above example,
you'll be short of covering yourself, meaning you have to go out and make
money. If you can't grow your passive income as fast, or faster, than expenses,
you won't be financially independent for very long.

Sure, you should have that side hustle (as covered in the previous step) to make
you some money.

But the ultimate goal here is to allow that side hustle income to be icing on the
cake that is financial freedom. It should be extra money that you can use to
travel, invest, give away, or do whatever you want with. It shouldn't be counted
on.

The ultimate goal is to be financially independent and retired early, which

requires being able to cover your regular, ongoing expenses with passive
investment income.

You need to make sure your passive income is growing at least as fast as
your expenses.

Now, there are many ways you can go about investing your money.

Gold, bonds, art, classic cars, websites, etc.

You won't be short on choices.

But there's only one long-term investment strategy that I see as the best strategy
to achieve financial independence and retire early.

That strategy is dividend growth investing.

This strategy basically involves buying shares in high-quality businesses that

reward their shareholders (the collective owners of any publicly traded
company) with regular, reliable, and growing dividend payments - growing
dividends which are funded by the growing profit these businesses are producing
by selling more products and/or services, at higher prices, to more consumers.

A dividend is a distribution paid by a company to its owners.

This is most often a cash payment sent to shareholders.

And it's most often a portion of whatever profit a company is producing.

A large enough collection of these dividends, folks, can free you from your job
and allow you to cover your expenses without working.

Paying your bills with dividend income is the dream.

A cash dividend is cash money.

Money is fungible. Someone collecting money from you (like, say, your
landlord) doesn't care whether that money came from a paycheck or a dividend.
It spends all the same.

But I showed you earlier how a dollar isn't a dollar.

While money spends all the same, it's not always earned all the same.

A paycheck is earned only after an exchange of time, skills, effort, stress, and
even money (uniforms, transportation costs to/from a job, lunches with
coworkers, etc.).

When you stop exchanging all of that, the paycheck also stops. That's the
package. That's the gig.

Meanwhile, a dividend is collected without an exchange of any of that.

You save your time, skills, effort, stress, and money for bigger and better
You save your time, skills, effort, stress, and money for bigger and better
ventures, passions, and pursuits in your life.

Better yet, dividends are taxed far more advantageously than W-2/wage income.

Dividends don't have FICA tax. And as of 2018, qualified dividends are taxed at
a 0% rate as long as the filer is within the 15% tax bracket.

That means earning, say, $30,000 in qualified dividends will have a tax bill of
$0. Compare that to your $30,000 paycheck.

You'll quickly see a dollar isn't a dollar at all.

And since the name of this game is increasing your savings rate and maximizing
the amount of capital you can rapidly save and invest toward your early
retirement, putting yourself in an advantageous position as it pertains to taxes is
obviously beneficial.

Collecting that stream of dividends is, indeed, the dream.

It's the old visualization of somebody walking out to their mailbox, in robes and
slippers, to casually collect their most recent dividend check.

Or you can imagine the Mr. Monopoly character from Monopoly, sitting back
and counting dividends like a boss.

I'd say it's in reality even better than any of that, though, because the process is
so easy and seamless, achieving financial independence via dividend growth
investing essentially frees you from worrying or thinking about money
whatsoever.

My dividends are electronically deposited into my brokerage account in the

precise amount and on the precise day (respective of the company paying and
their dividend payable date).

I don't have to do any work to collect that dividend income. No 1-800 number to
call. No letter to write. Nobody to bother. And nobody to bother me.

I go about my life, paying for anything I need to pay for. And then I'm able to
electronically move money around to pay bills. I don't even bother to think about
money. There's no collection process. And the payment process is as smooth, or
money. There's no collection process. And the payment process is as smooth, or
smoother, than if I were to be earning this money via a paycheck.

It's like this invisible benefactor has offered to cover my bills.

I'm paid just to exist.

Even I can do that!

What's really great about dividend growth investing, though, is that you're
investing in not only companies that are proving their profit by sending their
owners real-life cash dividend payments, but you're also investing in companies
that are regularly increasing their cash dividend payments - behavior which can
only be sustained over a long period of time when the underlying business is
producing the growing profit necessary to fund that behavior (those cash
payments).

That means you shouldn't be just collecting dividends. You should be

collecting more and more dividends, quarter after quarter, year after year.

This takes care of those inflation worries I just brought up.

Actually, it more than takes care of the worries.

That's because many of the highest-quality dividend growth stocks out there
(many of which I'm personally invested in) are increasing their dividends at a
much faster rate than inflation, meaning shareholders are seeing their purchasing
power increase all the time.

Look, you can't write a check that can't be cashed. And you definitely cannot
write ever-larger checks, year after year, if they can't be cashed.

The same goes for the companies you're investing in.

They cannot indefinitely pay out ever-larger dividends if the business isn't
producing the growing profit necessary to cover those growing dividends. You
cannot practically run a poor business while simultaneously paying out ever-
larger dividends to your owners. It doesn't work like that.

And so dividend growth investing generally limits an investor to a relatively

small universe of investment ideas, meaning an investor is picking stocks from a
pool of some of the highest-quality options available.
pool of some of the highest-quality options available.

Growing dividends end up being the "proof in the profit pudding".

I don't want a company to tell me how profitable it is. I don't want to hear about
growing profit.

I want a company to show me how profitable it is. I want to see that growing
profit with my own two eyes, with (more) cash in hand.

That stream of growing cash proves the company is doing well.

And it serves as an excellent source of passive income to pay your bills without
worries over a paycheck.

I used eating pizza as an analogy to explain why I don't think any job is worth
doing for most of one's life.

Well, I want to use pizza once more to better explain what dividend growth
investing is all about.

Let's imagine you want to open up your own corner pizza shop.

So you seek out capital because you don't have the necessary money in your
back pocket.

You don't want to start out massively in debt, so you instead offer a slice of
equity to private investors in exchange for capital to start your business.

Good stuff. You've got money. You start your pizza shop. You're building a
business, living the life of your dreams, and you're eating pizza almost every
day.

However, these investors aren't just any investors.

They're smart investors.

They don't want you to tell them how many pizzas you're selling. They want to
see it.

They're greedy, insatiable, gluttonous investors who want a portion of the profit
your new pizza shop is producing.
your new pizza shop is producing.

They demand quarterly dividend payments in order to produce a return and start
getting some of their money back.

Worse yet (for you), they demand that these dividend payments grow every
single year.

Now just think about how much stress that puts on you and your business.

You have to produce profit in order to make sure those dividends can flow out to
your investors. Not only that, you need to make sure that profit is increasing year
in and out so that the cash dividend payments can also increase.

Dividends keep a company and its management team honest and vigilant.

You can't fake a cash dividend. And you have to make sure the business is
always running optimally in order to keep that cash flow coming to the investors.

I've personally used this strategy since I started down the path to financial
independence (the spring of 2010).

And combining it with the aforementioned steps is what allowed me to quit my

job at 32 and become financially free at 33.

The result of my saving and investing is my real-life and real-money dividend

growth stock portfolio which I've coined the FIRE Fund (because it allows me
FIRE, or financial independence/retired early).

I share this portfolio with the world. And I update it every single month so that
readers can see what financial independence looks like for me.

My portfolio can be accessed here: http://www.mrfreeat33.com/portfolio/

That portfolio has (as of this writing) 110 of the highest-quality businesses in the
world in it. That's 110 different dividend growth stocks.

And it's generating more than $12,500 per year in dividend income for me.

Better yet, that dividend income is organically growing, without any effort or
input on my part.
Organic dividend growth, via dividend increases, is the "secret sauce"
behind this investment strategy.

This is what can create a runaway snowball of wealth and passive income for
you, meaning you'll likely one day have far more income than you can
reasonably spend.

I'll show you some math here to illustrate just how powerful this is.

Imagine you have $0 in passive income. But you want to build up a portfolio that
generates $875 per year in passive dividend income within a year.

That's a very reasonable goal for someone to start out with. And it's honestly far
better than what kind of passive income a lot of Americans are working with.

Well, assuming you're going to achieve a yield of 3.5% (approximately the yield
on my portfolio), you'd have to build up a portfolio with a market value of
~$25,000 (875/0.035).

$25,000 is no small chunk of change. It's a lot of money, frankly.

It would take someone starting out with nothing investing over $2,000 per month
over the course of the next 12 months to get to that point.

You can see how hard it is to start generating passive income. That's why a lot of
Americans aren't doing very well in this department. And that's why this guide
outlines steps (steps I've actually lived out) that are extraordinary.

But check this out.

I'm anticipating somewhere around 7% organic dividend growth from my

portfolio over the next 12 months. Perhaps more.

Said another way, the companies I'm invested in, collectively, are expected to
increase their cash dividend payments to me (and all their other shareholders),
on average, at a rate of 7% over the next year. And if you look at these
companies and their long-term dividend growth track records, on average, you'll
see that's a pretty sensible estimation. If anything, it's conservative.

Growing $12,500 at 7% ends up increasing the dividend income by $875.

That's right. That's an $875 increase in my dividend income - after not lifting a
finger.

It's essentially the same end result as someone else (who's starting out with $0)
investing $25,000 of their own money.

That's the snowball effect. And it intensifies as the numbers get larger.

It's like rolling a snowball at the start of a long hill. It might be small when you
first start rolling. But that thing will grow into a massive snowball with enough
time and rolling.

You want to create an avalanche with this strategy. An avalanche of passive

dividend cash flow.

Not only that, but it affects your wealth much in the same way.

I'm a guaranteed millionaire because of this.

Compounding my portfolio of ~$360,000 at 7% for the next 30 years turns into

just over $2.9 million - and that's without me ever adding one more dime of fresh
capital (which isn't going to happen, because I continue to save and invest even
in retirement).

Dividend growth investing is making my dreams come true - and it's allowing
for even bigger dreams all the time.

Let's break down this strategy a bit so that you, too, can use it to your advantage,
live off of growing dividends, and retire early.

The best way to approach dividend growth investing is threefold:

First, you have to identify a business you're interested in as an investor.

Second, you have to quantitatively and qualitatively analyze the business:

assess its fundamentals, competitive advantages, and risks to the best of
your ability.

Third, you have to value the business and its stock in order to make sure
you're paying the right price.
Identifying businesses is actually not that difficult.

You can look around your house, your neighborhood, your city, or even watch
advertisements.

Look at the toothpaste you (or other people you know) are using. Take a peek at
what company is providing you your utilities. Start checking out the brands of
food you (or other shoppers) are filling up the grocery cart with. Find out where
people like to get their morning coffee. Peep the brand of sneakers people are
wearing. And while you might (hopefully) not be driving a car, others certainly
are. These drivers must be getting their gas from somewhere. Check the names
of these gas stations.

I could go on, but I think you get the point here.

There are a number of global companies that "make the world go round".

They do this by providing the world with the products and/or services
consumers, other businesses, and even governments demand.

As the global population grows, more consumers will demand more of these
products and/or services. That means more goods and services to more people.

And inflation sets in, these products and/or services will become more
expensive. This is exacerbated by a company's pricing power, meaning they're
able to actually increase prices on goods and services faster than inflation
(because of demand).

So it's more products/services, to more people, at higher prices.

That sets the stage for increasing profits... and, you guessed it... increasing
dividends.

The best set of data I've ever come across for dividend growth stocks is David
Fish's Dividend Champions Contenders, and Challengers list.

That document can be accessed

here: http://www.dripinvesting.org/Tools/Tools.asp

Although David unfortunately passed away on May 12, 2018 (my birthday, as
fate would have it), his list serves as an incredible and invaluable source of
fate would have it), his list serves as an incredible and invaluable source of
information on stocks that have raised their dividends for at least the last five
consecutive years. Many stocks on this list (referred to as "Champions") have
increased their dividends for 25+ consecutive years.

When selecting businesses to be interested in and potentially invest in, you want
to figure out what this company is, how it produces profit, and why this story
should be compelling for many more years.

There's a narrative to look for. Every company is telling a story. And that story
should be compelling.

It should be a business model that's simple to understand and explain. And it

should be clear what makes the company so great at what it does.

Be able to easily and quickly explain to your grandmother or a small child what
the company does, how it makes money, and why it should make more money a
decade from now.

Once you've selected a business, or set of businesses, to potentially invest in, you
must perform your due diligence.

This means accessing financial reports, which can be easily found on a

company's investor relations site.

You'll want to look at what kind of revenue and earnings per share (EPS) growth
a company has produced over the last decade, compounded out annually.

You take revenue and profit from 10 years ago and compare that to the most
recent respective results. Then you use a compound annual growth rate
calculator (using nine compounding periods) to find out the compound annual
growth rate.

I typically like to see mid-single-digit (3%-5%) top-line (revenue) compound

annual growth from mature companies.

Bottom-line (EPS) growth should be in excess of this mark due to margin

expansion and share buybacks. I like to see 7%+ bottom-line compound annual
growth, which sets up dividend growth at least in that range.

Comparing these historical growth rates to a professional near-term estimate for

growth (accessing any variety of analysis reports that are usually available from
brokerage accounts) is quite helpful for building out a rational long-term growth
trajectory. That's because we don't invest in where a company was; we invest in
where a company is going.

You'll also want to look at dividend metrics. The dividend metrics are crucial for
a dividend growth investor, because we want big, sustainable, and growing
dividends.

So you'll be looking at yield, the payout ratio (dividend/trailing twelve months

EPS), the long-term dividend growth rate, and how many years a company has
been increasing its dividend.

My "sweet spot" is a 3%+ yield, 7%+ annual dividend growth, 10+ consecutive
years of dividend raises, and a payout ratio of 50% or less.

My portfolio probably averages out pretty well to look a lot like that, if you were
to average out all dividend metrics from all the stocks I own.

Those are numbers that I can work with. I can sleep well at night with a portfolio
full of dividend metrics like that. And I can be comfortably retired both today
and tomorrow (after factoring in long-term inflation) when I'm generating that
kind of passive dividend income and organic dividend growth.

Analyzing a balance sheet is also extremely important.

It's just like how you wouldn't want to (or maybe shouldn't) date or marry
someone deeply in debt. Debt is like a leech that drains resources and cash. And
it works against us and everything we want to accomplish.

While companies (even the best companies out there) almost always have some
debt, you have to make sure it's been an intelligent usage of debt and the debt
has been properly managed/contained.

Not all debt is bad debt. If you can take out debt that costs 3% but can go out and
earn 10%+, that's okay. But you have to be careful with that line of thinking.
That debt will surely cost you. But the growth may not materialize as you
anticipate.

Overall, I prefer less debt to more debt, all else equal.

Accessing any publicly traded company's most recent balance sheet is incredibly
easy.

Then it's just a matter of looking at some of the highlights: cash and equivalents,
long-term debt, shareholders' equity.

I like to see what kind of cash is sitting on the books against debt. And low
shareholders' equity can be rationalized by a lot of treasury stock (which can
happen via a lot of share buybacks).

Companies with a long-term debt/equity ratio of 1.0 or less (when treasury stock
isn't high) and an interest coverage ratio of at least five (preferably over 10) are,
in my view, responsibly managing debt.

Profitability should also be considered.

Return on equity (net income/shareholders' equity) is a bellwether metric for a

lot of investors, but I actually see net margin (net income/revenue) as the far
better metric because you're discovering how sales (in terms of a percentage) are
translating into profit.

After all, selling $1,000 worth of goods isn't that great if you're registering a loss
(meaning the cost of selling these goods exceeds revenue). Giving people dimes
in exchange for their nickels is a road to eventual bankruptcy.

But selling $500 worth of goods is fantastic if your net margin is 20% (meaning
net income of $100).

There are a number of other business fundamentals that you may (and likely
will) dig into, some of which vary depending on the industry (like, say, a
reserves replacement ratio for an oil major).

Beyond fundamentals, assessing a company's competitive advantages is crucial.

Competitive advantages add up to what the legendary investor Warren Buffett

has referred to as a company's "economic moat".

If you visualize a company as a castle, you want a wide moat to protect that
castle (company) against the hoards of invaders (competing companies) aiming
to take down that castle.
Competitive advantages can include (but is not limited to) the following: pricing
power, economies of scale, purchasing power, switching costs, and intangible
assets (licenses, patents, branding, etc.).

A large company that is operating at scale, distributing globally, buying raw

materials cheaply, leveraging its in-demand brands, and protecting itself with
thousands of patents has huge competitive advantages that would make it
incredibly difficult for a new (or even old) competitor to take down that
company.

This serves to protect your long-term interests.

Of course, even venerable companies can decline over time if they don't adapt to
changes, trends, or technology.

And that's why you want to fairly and honestly evaluate the full spectrum of
known risks a company might pose as a long-term investment, keeping in mind
the business model, management team, competition, regulation, litigation,
possible patent expiration, geopolitical exposure, etc.

It's also why you should broadly diversify your investments across numerous
sectors, industries, and countries.

As noted earlier, I currently have 110 companies in my personal portfolio. So

even if a one of the company's I'm invested in disappeared overnight, as unlikely
a scenario as that might be (the odds of something like that happening are pretty
much zero), I would still have 109 other companies humming along and sending
me my growing dividends.

In fact, even in this extremely unlikely scenario, the organic dividend growth
from the other 109 stocks would almost certainly quickly make up for any lost
dividend income from the one holding that went bust.

It's been said diversification is an investor's only free lunch. That's a free lunch
I'm happy to fill up on.

Diversification limits your risk by reducing your exposure to losses from any
one single investment. If you want a long, happy, and healthy retirement,
sleeping well at night and making sure to the best of your ability that your
growing dividend income stream remains intact is absolutely necessary.
Betting big on one or two horses is not advisable, in my opinion, especially
under these terms.

Once you feel that you've performed your due diligence across fundamentals,
competitive advantages, and risks, valuation is next.

Being able to properly estimate the intrinsic value of any stock is vital, as it will
greatly affect the performance of an investment, especially over the short term.

A dividend growth investor's aim should always be to buy high-quality dividend

growth stocks when they're undervalued.

Just like when you go out shopping for anything in your life, you want quality
merchandise when it's marked down (on sale).

Valuation will impact yield, total return potential, and risk.

When looking at dividend growth stocks, it's that first part that's particularly
notable.

Price and yield are inversely correlated. All else equal, a lower price will result
in a higher yield.

And since the name of the game here is early retirement, a higher yield (meaning
more investment income on the same invested dollar of capital) gets you to the
promised land that much faster.

If you estimate the value of a stock at $50 but buy it when it's priced at $40
(undervalued by 25%), you're setting yourself up with a higher yield, greater
long-term total return potential, and less risk.

Your higher yield impacts not only current investment income (by virtue of that
higher yield), but you're also looking at all future dividend growth/raises being
based off of that higher yield (that larger initial dividend income base).

That greatly accelerates the compounding snowball I mentioned earlier.

Total return is comprised of two components: investment income (via dividends

or distributions) and capital gain.

You can see how the former is positively affected.

You can see how the former is positively affected.

But the latter, capital gain, is also given a boost by way of the gap that exists
between a lower price and higher intrinsic value.

When a mispricing occurs in the stock market, creating a dislocation between

price and value, that sets up an investor for upside that can be captured if/when
the stock market corrects a previously incorrect pricing.

That's capital gain.

And that's on top of whatever capital gain will naturally materialize as a quality
company becomes worth more over time (as it sells more goods and/or services,
increasing its profit and value).

Maximizing upside tends to simultaneously minimize downside.

This reduces risk.

Undervaluation should provide an investor an opportunity to create what's called

a "margin of safety", or a buffer.

And so even if an investment thesis is wrong, or if the valuation estimate is too

rosy, or if mismanagement transpires, an investor protects themselves against
losses.

If you pay $50 for a stock estimated to be worth $50, you have no room for
error. Any unfavorable change in the business and its valuation would mean you
have an investment worth less than you paid for it.

But if you pay $40 for that same stock, you protect yourself.

It would have to take a serious myriad of issues to create a situation under which
the investment is worth less than you paid for it. A company would have to do
quite a bit wrong, or the business landscape would have to change a lot in a very
short period of time, before the business and its stock is worth 25% less than it
was before.

And even when unfavorable changes do occur, undervaluation should at least

give you time to react.

If you instead pay too much, the (downward) adjustment to a stock's price can be
If you instead pay too much, the (downward) adjustment to a stock's price can be
rather rapid. And that's even under fair conditions.

This is just like buying a house.

A real estate agent might present a report (including comps, market conditions,
selling history, etc) for you indicating that a house you want to buy is worth
$200,000.

Well, you don't want to go and spend $225,000 on that house. You're underwater
right away. You're buying an overvalued asset.

You instead want to buy that house for as far below $200,000 as possible,
creating instant equity and an advantageous set of dynamics that work in your
favor. That would be buying an undervalued asset.

This process is even easier to see and take advantage of when it comes to
dividend growth stocks because companies are producing real cash flow that can
be estimated out and discounted back to today, creating an easy model for
valuation.

The actual process of valuation is honestly subjective. There are many ways to
go about valuing a stock. I would recommend reading through every available
option and choosing the one that best fits you.

Reviewing the basic valuation metrics, like the price-to-earnings ratio (the
stock's current price against its earnings per share over the last twelve months).

The P/E ratio is a good but basic "first look" at a valuation.

You can find a stock's price using any third-party website.

And the TTM EPS can be discovered by pulling up the last four quarterly reports
for any company.

Third-party websites (like Google Finance) will generally also readily display
any stock's P/E ratio (but I highly recommend computing this ratio for yourself,
as some software out there isn't necessarily accurate).

Of course, there's no standardized P/E ratio to look for.

A company's industry, the various economic cycles, and even prevailing interest
A company's industry, the various economic cycles, and even prevailing interest
rates will affect (upward or downward) what a reasonable P/E ratio might be for
a particular stock.

That said, comparing a stock's current P/E ratio against its own long-term
average, the industry average, and even the broader market is generally a fairly
reliable way to go about getting an idea of whether or not a stock is priced at a
premium or discount.

Morningstar, which is a professional analysis firm, makes available these

historical averages. You can access their site here: www.morningstar.com

If a stock typically commands a P/E ratio of 18, based on years of data, but the
P/E ratio is currently sitting at 12, there's something going on.

Unless the company has significantly deteriorated to warrant that kind of

multiple compression, that would initially indicate some kind of potential
undervaluation.

This basic comparison can also be done for other basic valuation metrics, like
the price-to-sales, price-to-CF, and price-to-book ratios.

And that comparison can also be done for a stock's current yield.

Say, if a stock's currently yielding 4%, but if the five-year average is actually
just 2.5%, that might be a pretty strong initial indication that there's some kind of
disconnect between price and value. It's at least worth investigating further and
building that case.

Of course, investigating further and building your valuation case should be

customized for who you are as an investor.

But I can say that I personally use and heavily rely on the dividend discount
model analysis.

The DDM is a tailored version of the discounted cash flow analysis (with the
DCF analysis being the "gold standard" of valuing stocks). It's tailored to
dividend growth stocks because you're substituting all future cash flow for all
future dividend income.

A company is essentially worth the sum of all cash flow it will generate from
today until the end of time, discounted back to today (to account for the time
today until the end of time, discounted back to today (to account for the time
value of money).

Well, as a dividend growth investor, a stock is ultimately worth to me the sum of

all dividend income it will produce from now until Judgement Day, discounted
back to present value.

The DDM is extremely easy to use.

You simply need three numbers: a discount rate, the current annual dividend
amount, and a future dividend growth rate.

The current annual dividend amount is fairly obvious.

The discount rate (my desired rate of return) I usually use is 10%, which is just
slightly in excess of what the broader market has returned (in nominal terms)
annually over the last 100 or so years. I will sometimes bring that number down
a bit for higher-yielding stocks, since, all else equal, a higher yield (meaning
more income) is more desirable to me.

The dividend growth rate is an estimation (just as a bottom-line valuation will

be), but it should be an educated estimation.

A long-term track record for dividend growth is already known. Any company's
historical dividend growth rate is there for the taking. Looking at what a
company has done over the last, say, 10 years is a pretty good starting point for
drawing out a future trajectory.

Then there's looking at the rest of the dividend metrics you gathered earlier
(payout ratio, long-term EPS growth rate, etc.).

And I find estimating out a future dividend growth rate to be made much easier
when I have a good idea of future bottom-line growth, which itself is helped
along when I know the historical EPS growth rate.

But this process is aided by pulling up a professional near-term forecast for EPS
growth rate. These analysis reports can generally be had from most major
brokerages (I tend to use CFRA and Morningstar).

So if a company's 10-year DGR is 7.3%, the long-term EPS growth rate is 7.5%,
the forecast for near-term EPS growth rate is 8%, and the payout ratio is 54%,
the forecast for near-term EPS growth rate is 8%, and the payout ratio is 54%,
you have a pretty good base case for at least that historical ~7% dividend growth
rate to continue. And that's probably the number (7%) I'd use, to err on the side
of caution.

I think the DDM analysis builds in what I refer to as a "triple margin of

safety".

And I'll explain how that works.

There's first that discount rate.

If you model in a 10% discount rate (as I tend to do), you’re basically saying that
you’re accepting no less than an annualized 10% long-term total return. The
lower the discount rate, the higher the intrinsic value will be in the DDM’s
output. The higher the discount rate, the lower the valuation output will be
(assuming all other input is equal).

I use a 10% discount rate because it’s a reasonable expectation for most high-
quality dividend growth stocks. It’s also a very satisfactory annualized rate of
return when I consider the involved risks and the time value of my money.

But there’s also a margin of safety built right into that.

See, the long-term nominal compounded annualized rate of return for the
broader market (including dividends) is somewhere around 9%, with the real rate
being between 6% and 7% (as noted earlier on).

So by using 10%, I’m modeling in an annualized long-term compounded rate of

return that exceeds what the broader market has done over the last 100+ years.

Then there's the dividend growth rate, which is the second level to the margin of
safety.

But it's only a margin of safety as long as you're conservative.

I used that example just a few paragraphs ago to show you that you should err on
the side of caution when modeling in your dividend growth rate.

If you're modeling out a future dividend growth rate that's lower than the
historical DGR, the long-term EPS growth, and the forecast for near-term EPS
growth, you're building in another margin of safety - because the odds that a
growth, you're building in another margin of safety - because the odds that a
company disappoints you from those lower expectations would seemingly be
quite low.

And then there's the price you pay relative to your valuation output from the
DDM analysis.

After factoring in a conservative discount rate and DGR, you'll get your value
output.

Well, if this valuation output is, say, $50 but you pay $45, you're building in yet
another margin of safety.

You're paying less than even what you conservatively think the stock is worth.

That's the third level. That's the triple margin of safety.

This process is very quick, too, making it pretty painless to go about valuing a
stock once you find and analyze it.

Once you see how price, value, yield, and expected total return all interact with
and affect one another, you'll quickly start to appreciate when the market
actually takes a drop - which is the opposite of how most people (who don't
really know what they're doing with their money) feel when the stock market
drops.

Just like being excited for a sale down at your local grocery store, you'll be
anxiously anticipating buying stocks when they're cheaper (after they've dropped
in price), because you'll know your yield (and thus your passive dividend income
that you're collecting and reinvesting) will be higher and your investment
performance will likely be given a long-term boost.

And because the transaction costs are so minimal these days, you can take just a
little capital and buy a slice of a very fine business. You can do that for almost
nothing. And you can do it in just seconds. This means you can take advantage
of those market drops very, very quickly. That beats the pants off of most other
asset classes out there, especially physical real estate (where transactions are
very slow and costly).

These favorable dynamics of undervaluation, when present and taken advantage

of, can greatly aid you on your quest.
of, can greatly aid you on your quest.

Routinely buying high-quality dividend growth stocks when they're undervalued

is exactly how I ended up in my position, controlling a six-figure dividend
growth stock portfolio that generates the five-figure and growing passive
dividend income I need to cover my expenses and allow me to live out my early
retirement dreams.

Now, this is just a basic primer, as outlaid at the start of this step's explanation.

But I have put together a great list of books for further reading on my website.

You can find that list of resources here: http://www.mrfreeat33.com/resources/

It's highly recommended that you read much, much more about investing before
you actually put capital to work.

Intelligently investing your capital so that you can generate growing passive
income to pay your bills is vital toward the end we're discussing here. You
absolutely have to smartly invest your money if you want to retire in five years.
It's practically unavoidable.

That said, you don't want to invest your money if you're not sure of what you're
doing. If you're not 100% comfortable and in control of the situation, you can
actually do great harm and lengthen your timeline to retirement.

It was only after reading multiple books on investing that I finally felt
comfortable to move forward and build out my portfolio.

In my view, dividend growth investing is the perfect long-term investment

strategy for early retirement.

This is based on real-life experience where I'm able to live off of my growing
dividend income.

One huge reason for my belief in the strategy as it pertains to early retirement is,
dividends are typically predictable.

That's because you're investing in global, world-class businesses with predicable

profit and cash flow.
This is great for real life, because your bills/expenses will surely be predictable.
You will be predictably paying for housing, food, transportation, etc.

And due to the passive nature of the strategy and the dividends you'll be
collecting, you're totally freed up to spend your resources on activities you
thoroughly enjoy (which may, and likely will, include one of the side hustles
you've already set up).

Plus, you're basically forced to focus on just the best businesses in the world.

Because of that limited pool I noted earlier, you're essentially exorcising lower-
quality businesses that can't afford to pay growing dividends (because they're not
producing the growing profit necessary to fund those growing dividends).

Now, not every business that doesn't pay a growing dividend (or a dividend at
all) is low quality. I'm not saying that.

But there are a lot of companies out there that don't turn a profit - and perhaps
never will. Likewise, they don't pay dividends. This isn't where you want to be.

By avoiding companies that can't, or won't, show and pay you your fair share of
the growing profit the business is producing, you're basically creating a situation
where it's addition by way of subtraction (creating auspicious conditions
conducive to success by not investing in poor businesses).

And those growing dividends set you up for protection against inflation.

See, I'm not thinking just of the Jason Fieber of 2018. I'm thinking of the Jason
Fieber of 2028... and 2038.

If that future version of myself doesn't want to have to go dust off the résumé
and get a job (because his future expenses exceed his future passive income), the
current-day version of me must ensure that the passive dividend income is
growing at least in line with the growth rate of expenses.

I've used a bottle of Coca-Cola to illustrate this point before.

A bottle of Coca-Cola cost a nickel back in the 30s. Try going down to your
grocery store and paying that much today. It can’t be done.
High-quality companies that are providing the world with the products and/or
services it craves can and do charge more - much more, actually - for these
products and/or services over time.

While other people complain about rising prices, I rejoice. That's because I see
my passive income rising as a result of that.

If you can't beat 'em, join 'em.

Plus, dividend growth investing tends to beat the broader market over time,
which is just icing on what's already a very delicious cake.

This means while you're enjoying your lifestyle thanks to the growing dividend
income you're collecting, your wealth is growing at a very strong rate in the
background.

That will almost surely create a situation where you're able to leave a legacy
behind - perhaps you want to leave money to loved ones, or set yourself up as a
philanthropist.

Either way, having a significant pile of assets to rely on in life is a situation that I
don't think anyone would be unhappy with.

For perspective on the outperformance relative to the broader market, Ned Davis
Research has shown that dividend initiators and growers (dividend growth
stocks, essentially) outperformed an equal-weighted S&P 500 index between
1972 and 2016.

Oh, and the outperformance wasn't a little bit. It was massive.

You can see the research via a whitepaper produced by Hartford Funds
here: https://www.hartfordfunds.com/dam/en/docs/pub/whitepapers/WP106.pdf

This shouldn't be surprising.

That same whitepaper (as can be corroborated by even the simplest

research) shows that reinvested dividends account for 82% of the S&P 500’s
total return since 1960.

And when you're investing in high-quality dividend growth stocks with higher
starting yields, this effect ends up magnified to a substantial degree.
starting yields, this effect ends up magnified to a substantial degree.

Sure, you might be able to pick out a great growth stock (that doesn’t pay any
dividends) or two and do really well with those specific investments. But when
talking about building a diversified portfolio of high-quality businesses, dividend
growth stocks are the best game in town.

When you look at the long-term performance of some of the highest-quality

dividend growth stocks out there, you’ll see that they do very well when stacked
up against the broader market over longer stretches of time (anything can, of
course, happen in the short term).

In terms of getting started (once you're fully comfortable with your investment
knowledge and capabilities), it's as simple as opening a brokerage account,
funding your new account with capital, and buying stock.

Any of the major brokerages will do. Open an account with the one that will give
you the best deal.

The low barriers to entry is another aspect of this investment strategy that I
really love.

Buying stock is super cheap, easy, and quick.

It takes very little money and time to execute a transaction.

And then once your portfolio is actually built up, there's even less money and
time to worry about.

It's not as if any brokerage (none that I know of, anyway) charge maintenance
fees. So you can eventually enjoy that massive portfolio and the passive income
it generates, all while going about your carefree life.

You should, and likely will, be stuck on this step for almost the entirety of the
five years that this guide outlines as the stated goal for the timeline to early
retirement.

And I'll now discuss with you the goal you should keep in mind as a rough
estimate for ending portfolio value and passive income as it pertains to where
you want to be five years down the road (from the time you start your journey to
early retirement).
Keep in mind these numbers are per person. If two people (a couple) are aiming
for early retirement, the numbers should be doubled.

These are just rough numbers. They won't be exact. A lot will depend on your
savings rate, selection and performance of investments, terminal lifestyle
choices, etc.

But I'm assuming that you'll be able to save 70% of your net income, as I
discussed earlier.

And that should include your job income, your side hustle income, and even the
growing dividend income that will make up the rear. In fact, that last source of
income should become rather significant in the last 2-3 years of the journey,
greatly helping you maintain that high savings rate, even if your expenses start to
increase over time (due to inflation and other possible unforeseen issues/lifestyle
changes).

A goal for portfolio market value, five years after starting out with $0, should be
at least $200,000.

And that portfolio should be set up to yield at least 5%.

My personal dividend growth stock portfolio, as I've already shared, yields

something closer to 3.5%.

And as I've also shared, I didn't become financially independent as soon as I

could have. This guide is basically setting you up to get there faster than I did.
It's a more aggressive strategy for a more aggressive time frame.

With that in mind, you'd have to generate more passive dividend income from
your portfolio than I currently do.

You'll be sacrificing a bit of long-term income growth (yield and growth tend to
be inversely correlated) as a result, but the stretch (increased yield/current
income and a shorter time line to retirement) might be worth it (if you're truly
looking to retire ASAP).

If I had to restructure my own portfolio to achieve this same kind of yield,

I would probably be more heavily allocated toward utilities, pipeline companies,
real estate investment trusts, and telecommunication firms.
I would thus be less exposed to a lot of consumer, healthcare, and technology
companies.

This would be a more concentrated (and less diversified) portfolio as a result.

But I think one could put together a portfolio of at least 30 different dividend
growth stocks averaging out to that 5%+ yield while still offering an acceptable
amount of diversification, safety, and dividend growth.

A $200,000 portfolio yielding 5% would generate $10,000 in annual passive

dividend income.

How will you retire on $10,000 per year in income?

We'll get to the lifestyle aspect of this in the next step, but keep in mind that you
also should have that side hustle working for you, too. If you're earning even just
a few hundred dollars per month from your side hustle (which should be mature
and profitable five years into your journey), that gives you a lot more options.

But I actually believe you can retire on just that $10,000 - and I'll share how in
the next step.

Let's first focus on the math of how you get here.

How do you build up a $200,000 portfolio?

The math is actually quite simple, although I'm using generalities here because I
don't know your specific real-life situation.

I'm going to assume you're netting out $3,500 per month in income from your
job. That's using that aforementioned $50,000/year figure and applying an
overall effective tax rate (including FICA) of approximately 18% (factoring in
the current standard deduction, tax brackets, etc.). This is just an estimation for
a single filer.

What you actually earn and actually pay in taxes, in real life, will naturally vary.
I cannot pinpoint that for you. That's your responsibility.

However, this income should steadily ramp up annually, especially if you're

showing up early, staying late, and busting your rear to prove that you're part of
the team and deserve raises and additional responsibilities as they're made
the team and deserve raises and additional responsibilities as they're made
available. Don't be afraid of burnout here. Burn away. The career will likely be
short.

If you're able nail a 5% annual escalation in your day job income, that gets you
to somewhere around $4,200 per month in your fifth year.

Then there's the side hustle.

I'm going to assume you can average just $400 per month in net income (a
meager sum for someone driven to make their dreams come true) over the course
of the five-year journey.

That's roughly $100/week. This is a very low bar. You could get a part-time job
making $12 hour and work 10 hours per week (factoring in taxes) to clear that
hurdle. I'm really being conservative here. I think you'll find that you'll make a
lot more in this area if you're creative.

And then there's the growing dividend income, which will be 100% reinvested
back into the portfolio until such time you're ready to quit your job and live off
of that passive investment income.

Meanwhile, I'm going to assume you're spending somewhere around $1,200 per
month. That was a number I hinted at earlier.

That $1,200/month budget might break down as follows:

$600 - Rent
$250 - Food

$100 - Utilities
$100 - Public Transportation

$50 - Cable/Internet

$50 - Household/Personal
 $25 - Phone
$25 - Miscellaneous

That is a budget that looks somewhat similar to my own personal budget back in
2012, when I was living well below my means and aggressively investing every
spare penny I could. So this is shadowing real-life results here.

You might think this is too little to spend. I assure you it is not.

Again, if you want the "American Dream" (or nightmare, depending on your
perspective), you will be spending a lot more than this. And you'll be working
for most of your waking hours, for most of your life. Have at it.

But if you're a hardcore hustler who's ready to get out of the rat race, you'll have
to adhere to a budget that looks a lot like this, even if you make more than
$50,000 per year (which would only serve to allow you to save and invest even
more and retire faster).

By the way, that term - "rat race" - has always been interesting to me.

There's no winning the rat race. It's a race that never ends.

And what would happen even if you could win?

Well, you'd still be a rat.

No, thanks.

Getting back to this budget, I can assure you that one person (you'd have to
approximately multiply income and expenses by two if a couple is taking this
journey together) can live on this. I'd know. I've done it.

I see, for instance, Craigslist ads for apartments, right now, in Tucson, Arizona
for $600 per month. And they're not even studios. These are one-bedroom
apartments!

Don't tell me there's a housing crisis. Sure, if you want to live in San Francisco
and step over homeless people who can't afford rent, you'll be paying way too
much money for your accommodation and witnessing a housing crisis firsthand.
much money for your accommodation and witnessing a housing crisis firsthand.

However, there are plenty of areas in the US that are dirt cheap.

Tucson is a low-cost and low-tax area to set up shop.

El Paso, Texas is another good example. I see units, as of this writing, that are
available in this price range.

El Paso has warm weather, no state income tax to worry about, and a very
reasonable cost of living.

Keep in mind these aren't going to places you will be living in forever. So you
don't have to love Tucson or El Paso (or wherever you set up shop) with all of
your heart.

It doesn't have to "speak to you".

It just has to be advantageous, providing you with the proper spread between
income and expenses so that you can be home free in five years.

If you absolutely must live in a big city, you have to remain within the
constraints of this budget.

And I believe the best way to do that is to take advantage of the scale a big city
has - especially in terms of housing stock and rooms for rent.

In addition, you'll want to live in a big city that isn't on a coast. No LA. No
NYC. I believe you'll be setting yourself up for failure if you do that.

But a city like, say, Chicago might work. Or perhaps a Philadelphia.

You have robust public transportation, a ton of free activities, and plenty of
people looking for roommates.

I see rooms for rent on Chicago's Craigslist, right now, for $600 per month.

No. You won't be living in River North. But I see a number of rooms in that
price range not far from the Lakeview area of the city, which is one of the more
desired neighborhoods in all of Chicago.

Get yourself a CTA pass. Enjoy the free areas along the riverfront and lakefront.
The rest of that budget should explain itself, especially within the context of all
the information laid out in Step 2.

Let's get back to the math...

So you're investing all of your savings as intelligently, consistently, and quickly

as possible, building up that dividend growth stock portfolio and its passive
dividend income that will set you free.

I'm using a compound interest calculator that can be found

here: http://www.moneychimp.com/calculator/compound_interest_calculator.htm

I'm assuming a starting balance of $0.

The annual contribution I'm assuming is $35,000.

I'll tell you how I got that.

You're starting out with $3,500 per month in net income. But I'm throwing in a
5% escalation in there and spreading that out over five years. I then took the
number in the middle, roughly factored in taxes, and averaged that out (you'll be
under that number at the start, but you'll be higher in the end and make up for
lost ground) to $3,700 per month.

I then threw in the $400 per month from your side hustle (which is, honestly,
conservative).

That's $4,100 per month in net income to work with.

I subtracted the $1,200 in expenses.

That leaves you with $2,900 per month to save and invest.

That adds up to $34,800 per year. I rounded up.

However - and this is huge - I completely left out the dividend income you'll be
earning and reinvesting all the way along. Folks, we're talking something near
$30,000 in aggregate dividend income (assuming that aforementioned 5%
portfolio yield) over this period - that's reinvesting and compounding over the
course of five years of saving and investing.
I mean, taking a look at that last year, when the portfolio is closing in on
$200,000, you should be generating around $10,000 in annual dividend income.
That's $800+ per month - just in that last year - that you can reinvest.

But I left this out to really err on the side of caution here, meaning you could fall
slightly short in one or more savings/investing area and still come out okay.

Just like the DDM analysis builds in a triple margin of safety, I'm building in
multiple layers of safety here with the ending portfolio value.

One might wonder where the emergency fund is, but I've never really kept one.

I've always invested in taxable accounts (because I'm not waiting until 60 to
retire and access my investments), which means I've always had immediate
access to plenty of capital and income, just in case an emergency were to befall
me. The typical advice of keeping six months' (or more) worth of expenses aside
in the bank (earning next to nothing) as an emergency fund doesn't really apply
in this case, in my opinion and experience. That advice is suited a bit better for a
typical American who doesn't know how to cash flow their life. But if you feel
more comfortable with cash in the bank, go for it. There's room for it in these
calculations.

So I'm taking $35,000 per year and I'm compounding it at 7% per year for five
years.

The 7% compounded rate of return is taken from the number I gave you earlier,
which is roughly the long-term real rate of return from the stock market. That
means I'm factoring in US inflation here.

But I think you could (and probably should) do better than that 7% rate, due to
the favorable dynamics of investing in undervalued high-quality dividend
growth stocks that was already laid out. However, that depends on the market
conditions during your five-year journey.

And this money is compounding over five full years, which is the length of this
journey. You need five full years in order to let that money compound for you
and mature to a portfolio size and amount of passive dividend income you need
to retire.

If you run those calculations in that calculator I linked to (or any compound
interest calculator), you'll get an ending value of $210,030.70. That's assuming
compounding 12 times per year (because you're saving, investing, and
reinvesting 12 months per year).

Again, I left out the reinvested dividend income that will only serve to boost this
number rather significantly - likely to near the $250,000 mark.

This is just a very, very conservative look at what this plan and math could do
for you.

So we're talking well over $200,000 here. That's more than a many older
Americans in the last years of their lives have to live off of. And you're building
it up in just a few years. Plus, you'll actually get to keep your youth. It's pretty
remarkable.

That ending portfolio value - after the five full years of saving, investing,
reinvesting, and compounding - should be north of $200,000, yielding 5%+,
and generating $10,000+ in passive and growing dividend income.

Now what?

Now we execute arguably the biggest, most extreme, and most important step of
them all.
 Step 5: Move Abroad

Wait a second.

Did he just say move abroad?

Yes.

Yes, I did.

I relocated indefinitely to Chiang Mai, Thailand in 2017.

I refer to myself as a "dividend expat".

That's a riff on the popular digital nomad term - except I'm more dividend than
That's a riff on the popular digital nomad term - except I'm more dividend than
digital, and more expat than nomad.

And you, too, could be a dividend expat.

This step is the crowning achievement.

It's might seem, at first glance, to be the most hardcore and flat-out crazy step of
all.

But I believe you might, in time, come to see it as I do: the easiest and best step.

First, let's talk frankly about what exactly a place is.

A place is just a location. It's a rock you walk around on.

That's it.

Being born in one particular place or another doesn't confer any uniqueness to
that place, other than what exists in your own mind.

You give special value and meaning to a place. And this meaning may very well
be misplaced.

A place should be looked at based on its merits, not its physical location relative
to where you’ve already been located for any certain period of time. You should
have already started to learn this when you chose a place to live that offered
maximum potential for financial independence and early retirement.

Said more simply, we shouldn’t live somewhere because we’ve been living there
– or because we were born there. We should live somewhere because we’re
making our best choice after honest and contemplative introspection about who
we are and what we want out of our physical space.

And so a physical place – a place where you live for any particular period of
time – becomes more of a fabrication than anything else.

If you start to rewire your brain in this manner, you may quickly realize that the
US - a fine, fine place to live for may people (don't get me wrong) - isn't
necessarily a great place to continue living (after your assets have been built up)
if you want to retire early in life and live a lifestyle that doesn't operate around a
the rat race.
the rat race.

This brain rewiring took some time for me to accomplish.

There's some intrinsic programming that seems to dwell deep in the fabric of our
souls, encouraging us (out of loyalty or patriotic duty?) to stay where we were
born.

But I'd equate the "a-ha moment" that occurs when you're successful at this brain
rewiring as just as powerful as that eureka effect that happens when you come to
see financial independence as easily attainable.

Both financial independence and moving/living abroad are difficult only in the
sense that we place our own mental blocks on these ideas.

If you don't believe either are possible, they're not. Likewise, if you believe both
are relatively easy, they are.

Furthermore, they work in tandem. These two lifestyles complement each other.

When you're financially free, you're also suddenly geographically free.

Once your income is independent of a job or even a physical location

whatsoever, you can then live anywhere in the world.

You then have to have an honest conversation about whether or not where you
currently live (which might well be somewhere like El Paso or Tucson) is a
place you want to live for many more years (perhaps the rest of your life).

For me, there aren't really any options in the States if you want a combination of
high quality of life and low cost of living.

You can commit some temporary domestic geographic arbitrage and set up camp
in a low COL city to take advantage of the cost structure, make your money, and
get yourself in a position to quit jobbing ASAP. This is basically what I did
when I moved from the Ann Arbor area of Michigan to the Sarasota area of
Florida.

But I wouldn't rate many of the US cities where this is possible as great long-
term living options (your mileage may vary).
However - and this is huge - there are many, many fantastic cities around
the world where you can, indeed, gain access to both a high quality of life
and a low cost of living.

This is where you jump from domestic geographic arbitrage to international

geographic arbitrage.

The spread between QOL and COL is highly favorable in many fascinating cities
across the world.

And once you're financially independent, there's almost nothing stopping you
from living in one of these places.

Geographic arbitrage can make your early retirement dreams come true.

I currently live in Chiang Mai, Thailand.

It's incredibly wonderful to live here.

The climate is warm, the people are friendly, the food is delicious, the
infrastructure is good, the entertainment is fantastic, and the cost of living is very
low.

You might think there's some kind of massive culture shock here.

But I'd argue it's the opposite. I actually experienced a reverse form of culture
shock after moving here.

You just have to get rid of mental blocks and preconceived notions. You have to
step out of your comfort zone a little bit, which is something the previous steps
have been building on.

The "American Dream" (again, my nightmare) seems to be working too many

hours and striving to buy/own as much stuff as possible - ending up overstressed,
overworked, and overweight in the process.

Meanwhile, there's a law against working more than 48 hours per week in
Thailand. Yet the home ownership rate is way higher in Thailand than in the US
(roughly 80% versus 65%).

Thai people are thinner, happier, less stressed, and easier to get along with.
Thai people are thinner, happier, less stressed, and easier to get along with.

Thailand is not nicknamed the "Land of Smiles" for nothing.

America was filled with a bunch of anti-me - people that wanted and did the
complete opposite of everything I wanted and did. I felt like I was living in some
kind of alternate universe over there.

And if you really, really want to retire in five years, I think you'll find the same
true in your own life.

It's unlikely anyone will understand what you're doing, agree with your choices,
or root you on.

You'll be voluntarily unplugging from a system that almost everyone else,

whether they want to or not, is still very much plugged into.

There will likely be bewilderment, resentment, and perhaps even anger.

Why stay in a place like that?

Indeed, a very good question to pose.

I posed that question to myself. And I couldn't come up with a very good
answer.

So I indefinitely decamped for Thailand in 2017.

I've never been happier as a result.

I've found way more in common with people here than my fellow Americans.

For example, I earlier shared a story with you readers how I ate ramen noodles
for lunch for a year straight in order to save as much as possible on food.

Well, I was looked at as a weirdo by my coworkers for that.

But Thai people eat cheap noodles (and rice) every day.

While Americans spend way too much money on massive portions of food, Thai
people spend less, eat less, and end up thinner and healthier for it. I'm among my
own people here.
I've been eating Thai food almost exclusively since I moved over here. I lost five
pounds within the first month of living in Chiang Mai - and I was already in
good shape before I came.

Another example is, I had a cheap scooter for a while when I lived in Florida. A
little 49cc scooter to get me around and complement my bus trips and walking.

Again, I was looked at very strangely for this.

But motorbikes are everywhere over here.

Cars are (rightfully) looked at as an expensive (and often unnecessary) luxury,

rather than a necessity - no, a right - by Americans.

I've been writing for years. And I'm often in coffee shops, plying my craft.

In America, it was soccer moms coming through to grab a quick cup of java on
their way somewhere. Or it was people all dressed up for work, swinging by on
their lunch break for a quick sip. It was a nonstop go, go, go.

It's totally different over here.

People actually sit down, enjoy their coffee, have long chats, check their
smartphones, and actually rest.

Work has four letters. Rest also has four letters. But one is a "four-letter word" in
America, and the other is very much not. You're lucky to get two weeks of paid
vacation, yet approximately half of American's don't even use their allotted
vacation time. It's nuts.

Two weeks?

I'd rather have 52, thank you very much. Oh, and I'll be sure to use them all.

It's like being on a different planet over here.

When I started to experience all of this firsthand, I felt like I was finally
home.

Thai people might not speak my language literally, but they're

definitely speaking my language figuratively.

Breaking down the money, I currently spend between $1,200 and $1,300 per
month living here. I even publish my expenses on my website to remain
transparent. To be honest, I'm spending a lot of money in relative terms. I'd bet
I'm in the top 20% or so of all spenders in Chiang Mai. I'm long past the days of
eating ramen noodles, folks.

However, I also cover many of my Thai girlfriend's expenses. I do that by

choice, not because I have to. But if I were single, or if I didn't volunteer to help
her, (because I can and because it's a pleasure of mine to help) I could easily get
by on much less.

Furthermore, I wanted to leave the States because I wanted to be completely

free.

What I mean by that is, I wanted to be free from money itself.

Financial freedom is wonderful. But it's not as great as it could be if you're

constantly worried about money and keeping your spending in check in order to
fall under passive income.

The hardcore budgeting I proposed above isn't meant to be something you do for
the rest of your life. Watching and pinching every penny for the next 30 or so
years is not my idea of a life well lived.

This early retirement plan isn't about being cheap. It's about being
strategically frugal for a period of time in order to save, invest, and open
your options way up. You determine worthiness based on value, not price.
You eschew stuff in favor or moments.

We all have a "bank of seconds" that we're withdrawing from all the time. We
can avoid spending money, but we can't avoid spending time. Every moment
passed is one less moment you have. And we're getting older - and closer to
death - every second.

The whole idea here is to keep your money, so that you can keep your time.

But you're not doing that in order to live some miserly life, sitting in a room, all
alone.
You should be seeking a life full of time, value, purpose, and passion.

Geographic arbitrage simply makes this more possible than ever before because
the money - indeed, the time - is worth much more elsewhere, making you an
"instant millionaire" in both money and time terms.

So you leverage the assets and passive income, engaging in geographic arbitrage
and moving yourself to a place where that money goes a lot further.

I've noted a few times how a dollar isn't a dollar.

Well, it's true yet again.

A dollar in the United States has a certain amount of purchasing power.

You know what you can buy with a dollar. I don't need to tell you that.

But that same exact dollar can have significantly more purchasing power in other
places.

I would say my purchasing power has been tripled over here in Chiang Mai,
Thailand.

So what I could buy with $1 in the US, I can now buy with approximately 33
cents.

Said another way, my ~$1,200/month in spending roughly affords me a lifestyle

that would cost about $3,600 per month in the US.

Thus, my portfolio value and the passive income it generates has been
effectively tripled in local spending terms.

All it took to accomplish that was a ~$600 plane ticket.

If you want to know what the single best financial investment I've ever
made is, it's that plane ticket to Thailand.

That $600 "investment" in geographic arbitrage took my portfolio value from

~350,000 to just over $1 million, relative to local purchasing power and the
value of those dollars in local spending terms.
My lifestyle is a millionaire lifestyle. I was turned into a millionaire overnight,
just by relocating myself to somewhere that, in my experience, is actually a
better place to live. I'm richer and happier. It's a total win-win.

But keep in mind here, I don't mean a "millionaire lifestyle" in the sense that I'm
buying a lot of stuff.

I don't own a house. I don't have a car.

I barely own any stuff at all. I came to Thailand with two bags. And everything I
own can still fit in two bags.

That was on purpose, because I'm a minimalist.

Minimalism is fantastic. But its name belies its true power: maximizing
everything worthwhile in your life.

I don't own a car. I don't own a house. I don't own a bunch of stuff. Stuff doesn't
make me happy. Stuff clouds my space, my mind, and my wallet. Stuff drains
me of valuable resources.

But I do own a lot of time, which is by far my most valuable asset.

While others are busy running around working to make money to pay for their
stuff, they seem to be oblivious to the fact that their stuff owns them.

Since I own my own time, I'm the master of my own universe.

And I own plenty of physical assets, too. It's just that my stocks take up no
space, which is just great. I can go move halfway across the world while my
most valuable assets digitally move with me. It's fantastic.

Moreover, my life is filled with amazing experiences.

It's a life that's customized for me and by me. I've been able to build a daily
routine that fills me with joy. In fact, my routine is set up so that every day looks
just like the one before it... and the one after it.

It's like I'm living out the life of Bill Murray's character from Groundhog Day,
except I'm not trying to (hilariously) escape my predicament.
Instead, I simply asked myself what my perfect day would look like.

Then I built it.

And I repeat it.

It's waking up mid-morning (because I'm not a morning person), eating delicious
Thai food for lunch, spending time at the coffee shop writing, hitting the gym in
the late afternoon, heading home for a shower, then going out for dinner with my
girlfriend and/or friends. It's an amazing day. And I'm able to live it every day.

But it's only possible because I'm financially independent.

And geographic arbitrage made this far more possible because of a much lower
cost structure, which greatly amplified my money, time, and options.

So I don't own a house over here.

But I'm still quite comfortable.

I live in a luxury, furnished one-bedroom apartment in the most walkable and

nicest part of the entire city. This place is practically brand new. Cable, wifi,
furniture, a gym, a sauna, and a pool are all provided for me. It has an elevator,
fingerprint access/security, and a 24/7 guard.

You can even see pictures of my apartment by seeing the report I provided on
my blog: http://www.mrfreeat33.com/my-420month-apartment-in-chiang-mai/

The cost?

A bit over $400/month.

That would cost at least three times as much in any comparable US city. We're
more realistically talking 4x to 5x as much.

That right there is the power of geographic arbitrage.

I'm spending a few hundred dollars per month on food - for two people.

But it's not ramen noodles and PB&J, guys.

I'm eating outside of the apartment for every meal.

That's local markets. Thai restaurants. International restaurants.

You name it, I probably eat it.

But I don't shop for it, store it, prepare it, cook it, or clean up after it.

I just show up and eat. Hey, even I can do that!

Just try eating out at restaurants for every meal - and paying for two people - in
the United States (or some other high-cost place). See how much that costs you.

Better yet, don't do that, because it's against all the advice I've given you.

Look, I'm living an incredible lifestyle over here. And it costs very, very little.
My total annual passive income actually isn't much higher than the official US
poverty rate for a single person.

Well, I can tell you I'm nowhere near poverty here.

This is what geographic arbitrage can do. It can take a "poverty-like" existence
in one place and transform it into a "luxury-like" existence somewhere else, all
on the same amount of money.

But you don't have to spend what I do. I could spend less if I had to. And keep in
mind I'm spending for two. My personal spending (just on me) is about $900 per
month.

In fact, I've had conversations with single people who live here on just $500 per
month.

And it's not like they're living in squalor. They have apartments, eat at the
markets, and even have the occasional night out with friends.

They just have to be mindful about spending, while I don't even bother thinking
about money anymore.

Now that I've lived here for almost a year, I can clearly see how this is very
possible.

The cost structure in Chiang Mai is just incredibly low across the board.
The cost structure in Chiang Mai is just incredibly low across the board.

Getting back to the math I presented at the conclusion of the previous step,
you're rocking a $200,000 portfolio that's pumping out $10,000 per year in
growing passive dividend income.

So the question becomes, can you retire in Thailand with $200,000?

My answer is a resounding yes.

Let's break it down.

$10,000 per year is $833/month.

That's $333 per month more than what quite a few people are living on. And it's
not far off from what I'm spending on myself - without even trying. Spoiler alert:
it's easy to live here on that kind of income.

But that's not where we'll end things.

I'm going to give you a budget that is based on real-life experience, talking to
people who live here on little, and checking prices for myself. These are real-life
numbers that I think could translate into a very reasonable and comfortable life
for one person.

This monthly retirement budget looks like this:

$250 - Rent
$200 - Food

$100 - Coffee/Bars/Entertainment

$100 - Visa
$60 - Miscellaneous/Incidentals/Toiletries

$25 - Transportation
 $15 - Mobile Phone

That adds up to $750/month.

So there's even a nice little buffer in there for unexpected issues/expenses.

Actually, there's a humongous buffer (if you haven't already caught it).

That's due to two reasons.

First, I'm not even including the side hustle that you should have developed to
maturity by now. That should be cash flowing very nicely for you by this point
(which is more than five years into the game). If you're not making at least $500
per month from that, you're doing it wrong.

Second, the portfolio value and passive income, as I noted earlier, should
actually be much larger than what I'm presenting here (I left out all reinvested
dividend income). In reality, you should be, by this time, sitting on far more
wealth and passive income. This result is allowing for many speed bumps along
the way.

Yet, even without that side hustle income and the larger portfolio, you're still
living very comfortable here in Chiang Mai - with room to spare!

You should actually be sitting at a portfolio value of $250,000+ with annual

passive dividend income somewhere near $12,500 and side hustle income of
$500+ per month.

We're talking over $1,500 per month, which is twice as high as what I'm giving
you. So if you want to say all of this isn't possible, I'm saying it's possible twice
over. I'm basically giving you something close to a worst-case scenario to work
with.

Let's break that budget down.

A $250/month apartment is a very nice one-bedroom apartment in a pleasant and

safe part of the city. $250/month won't even rent you a closet in the States, but
it'll buy you a very, very comfortable space here.

That food budget allows for eating out every day. You'll probably want to eat at
the Thai markets most of the time because, well, the food is delicious and cheap.
the Thai markets most of the time because, well, the food is delicious and cheap.
You'd be crazy not to eat at the markets. But since the meals only run $1.00 to
$1.50 each, you'll even have plenty of money to spare for the occasional more
expensive Western fare (like burgers and pizza).

Coffee, bars, fun. Whatever floats your boat. $100/month goes a loooooong way
in Chiang Mai.

The visa expense has to be accounted for. You'll have to either fly in/out for a
tourist visa, or (preferably) you'll arrange a long-term visa of some sort.

I stay here on an ED (education) visa that allows for one-year stays as long as
I'm enrolled in a qualified program of some kind. You can study Thai, defense,
scuba diving, etc. Pick a program, enroll, and get the visa. It's pretty simple.
You'll just have to account for the costs in your monthly budget.

Miscellaneous speaks for itself.

Transportation is practically free here. I walk most places. It's warm outside
most of the year. And the city is quite compact and dense. When I have to get to
the other side of town, I simply call for a Grab car (the SE Asian version of
Uber). Because labor is so cheap over here, I can go all the way across town for
around one dollar. It's great.

Mobile phone plans are also very cheap over here. I pay $15/month. I get
unlimited data with tethering. I mean, that's just crazy. Taxes alone would cost
$15/month on a similar plan in the USA.

Now, this is all speaking about Chiang Mai, Thailand.

But Chiang Mai is just where I chose to live. It's one city of many to choose
from.

The key for you is doing your research and finding a place where you'd think
you'd be happy settling down in for the long haul.

Quality of life is a subjective concept.

But if you know what makes you happy, you can drill things down into objective
measures.

For instance, it's objectively warmer in Thailand than in Hungary. And it's
For instance, it's objectively warmer in Thailand than in Hungary. And it's
objectively cheaper than Chiang Mai than in Chicago.

There are certain things that tend to make many people pretty happy. People like
warm weather, the ability to easily afford life, good infrastructure, a healthy
circle of like-minded people, access to enjoyable activities, etc.

You can objectively compare these options from one place to another.

Five big categories you should probably be looking at: climate, cost of living,
food, infrastructure, and the people (both local and non-local).

For me, Chiang Mai beat everywhere else in every category... by far.

But I like warm weather.

I find Thai food (a world-class cuisine) to be delicious.

The cost of living is one of the lowest in the world.

And the people are great. Thai people are gregarious. They're constantly smiling.
Plus, Chiang Mai has an international reputation as a bit of a hot spot for digital
nomads, so I get to meet interesting entrepreneurs from all over the world. And I
think Thai women are attractive (I came here single).

The infrastructure is more than acceptable, with modern roads, malls, gyms,
hospitals, etc.

That all said, find a place that suits you. Where you ultimately pick to stay at for
the long haul should be pretty close to what I consider a good definition for
"home":

Where you live should be where it’s most advantageous, best setting you up
to excel across every area of life that you deem important. A home is just a
piece of shelter on a rock. The major distinctions between all available
choices of where one can live are advantageousness, happiness, and the
ability to succeed at one’s chosen set of endeavors.

If you don't love it, that's okay. A lot of other places to try. But you also don't
want to be a globetrotter. That can add up fast.
I can list quite a few cities that would also allow for an advantageous spread
between QOL and COL: Medellín, Columbia; Cebu City, Philippines; Da Nang,
Vietnam, Tbilisi, Georgia; Bucharest, Romania; Bangkok, Thailand; Kuala
Lumpur, Malaysia; Cuenca, Ecuador; Sofia, Bulgaria; and San Miguel de
Allende, Mexico.

Those are 10. There are 100 more where that came from.

Keep in mind, though, these aren't just cheap cities. There are many extremely
cheap places around the world that also aren't nice places to live. Just because
somewhere is cheap, it doesn't mean you should live there.

The cities I listed are places where, in my opinion, you can get a high quality of
life at a low cost of living. It's maximum quality of life at minimum cost of living
that you want. That "sweet spot", where the spread is the widest, is where you
want to be.

I mentioned the "big three" earlier: housing, food, and transportation.

Geographic arbitrage essentially hits these three areas the hardest. Living in
Thailand (and many of the places I just listed) is so wonderful and cheap because
these spending categories are especially cheap.

A gym membership, for example, isn't terribly cheap over here. But that's not
why you're moving.

However, I'm about to expand on this concept and open you up to what could be
referred to as the "big five" budget categories.

You take the first three, then you add two more.

The additional two categories are taxes and healthcare.

These two tend to absolutely crush many Americans.

Well, I already discussed earlier how you largely solve taxes.

Qualified dividends are advantageously taxed right out of the gate. Earning
$30,000 in qualified dividends nets you $30,000. Earning $30,000 from a job
does not net you $30,000.
Living off of dividends could set you up for a tax-free (or nearly tax-free) life.

But geographic arbitrage builds on this even further.

That's due to the side hustle income I've been talking about.

See, the US has a nice little break for expats written right into the tax code
(although this could change at any point in the future, which means you'll have
to remain vigilant about this if you're reading this book years after it was
published).

That break is called the Foreign Earned Income Exclusion.

The FEIE essentially allows a US citizen or resident alien of the US living

abroad to exclude a certain amount of their worldwide income from US federal
income taxation.

As of 2018, that amount is $104,100.

So you can earn up to $104,100 overseas in 2018 and exclude that from federal
income tax.

This is a massive benefit.

If you earn your side hustle income in the US, you'll probably be paying taxes.

But if you, say, set up an online business and move yourself abroad, you can
exclude that income (as long as it's under the FEIE limit and you live abroad for
330 full days during a period of 12 consecutive months) from US federal income
tax.

Dividend income tax?

Solved.

Side hustle income tax?

Solved.

They say you can't escape death or taxes.

Well, I'm still working on that death part. But taxes can be completely, or at least
Well, I'm still working on that death part. But taxes can be completely, or at least
largely, avoided.

Now, your side hustle income will still be exposed to FICA.

But I don't really consider that so much a tax as an enforced savings plan. The
odds of the US just outright cancelling Social Security are practically nil, so
you'll likely get that money back through your lifetime SS benefits (and perhaps
more than you paid in, depending on how long you live).

(It's possible to avoid FICA by moving your business offshore and structuring
your income in a certain way, but this is expensive, complicated, and often
unnecessary.)

And you should be able to avoid state income tax, too.

Part of this is setting up your residency in a state that doesn't tax income.

As noted, I moved to Florida many years ago. They don't tax income. I then
simply kept an address there through a virtual mail service. So state income tax,
for me, has been solved for a long time now.

But if you don't initially set yourself up in this way, check with your state
authorities how they handle expats. The odds are pretty good that if you live
abroad, they don't/won't tax you.

However, it may still be worthwhile to set up residency in a state that doesn't tax
income before you leave the county permanently. Just one less headache to
worry about.

Then there's local taxes, like sales tax.

This, too, has been largely solved.

Whereas most US states and cities add a sales tax on top of your purchases, I
almost never pay any kind of additional sales tax over here.

Many goods are sold in markets. The price you see is the price you pay.

I pay 40 baht for my lunch, for example. That's approximately $1.20 (based on
the current exchange rate).
I don't then pay a tax on top of that. I don't, say, pay 42 baht or something. It's
just 40 baht.

And this is the same for just about everything I buy.

I'll sometimes see a VAT (value-added tax) on certain goods and services
(especially imported goods).

But it's honestly quite rare. And the few times I've run into it, it's baked right into
the price. So if something is 100 baht, you'll see a receipt that shows a purchase
price and the VAT adding up to 100 baht. It's not added on top of a price.

So you can live a tax-free life, or at least one that's very, very close to it.

And then there's healthcare, which (as of this writing) is insane in the US. If it
weren't so tragic, it'd be funny.

I was on pace to pay more than $500 per month for a bronze plan in the
exchange for 2018.

That would be a high-deductible plan in Florida using healthcare.gov. This is the

Affordable Care Act we're talking about.

Affordable?

That's paying $500+ per month for... the privilege to pay more money in case
something actually happens to me. If something were to befall me, there's
deductibles, co-pays, and all kinds of other healthcare jargon to worry about.

Just when I'm sick is precisely when I want to read through complicated
paperwork about why I have a $20,000 bill.

Affordable?

Or not.

What did I do?

Well, I hacked my way right past this through geographic arbitrage.

I've abstained from healthcare insurance at all.

That's because I'm insuring myself. Now we're talking affordable.

Remember, an insurance company is in business to make money off of you. It's

generally a (highly) profitable business model.

They're charging you a lot of money upfront (via the premium). They're then
able to invest that money and earn a risk-free return off of what's almost zero-
cost money until such time that you make a claim on your policy.

They build up what's called a "float". That's the difference between premiums
collected and claims paid out. And due to the time lag that occurs between the
two (especially for people who never make claims), the float can be very
powerful.

An insurance company can build a massive investment portfolio from other

people's money. It's amazing.

The float has been a major factor behind Warren Buffett's ascension to massive
fortune, as he used the concept to invest that money in a way that pretty much
nobody else has been able to replicate. He took what's already an amazing idea
and supercharged it.

Now, if something happens to you, you file a claim.

Then the insurance company figures out how to pay you the least amount of
money, and drag that process out for as long as possible (which serves their
interests since they're making a lot of money off of your money).

Well, I've decided to bypass that idea completely.

I self-insure.

(I'm not recommending you do this. I'm only sharing with you what I'm doing.)

I "pay myself" a premium and invest it. I build my own float.

Being young and healthy, the odds are pretty good that I come out way ahead by
insuring myself.

I've calculated the numbers already, and I believe I'll come out hundreds of
thousands of dollars ahead.
thousands of dollars ahead.

You can see the calculations here: http://www.mrfreeat33.com/three-reasons-

why-i-dont-have-or-want-health-insurance/

And that's only after 20 years. Most major healthcare problems I would likely
encounter would come even later in life, setting me up for millions of dollars
(I'm a guaranteed millionaire, remember?) to face potential issues with.

Now, I can afford to take on the risk. And that's what the insurance company is
basically offering: risk assumption. They take on the risk you can't afford.

However, I can afford to take on my own risk due to four reasons:

First, I have a portfolio already worth hundreds of thousands of dollars - and it

will almost certainly be worth millions by the time I'm in my 60s. A typical
American doesn't have that kind of wealth. Actually, it's not even close. Various
studies have come out showing that the average American can't even afford a
$1,000 emergency. So covering a big hospital bill is out of the question. If a
health problem were to come my way, I can comfortably pay.

Second, I'm young. I'm only 36 years old. Because I've aggressively followed
these steps myself, I've been able to hack my way through the typical career arc,
amassing a lot of money and retiring far early than 99% of other people. Because
of my youth, the odds are on my side that I won't face major health issues any
time soon, giving my capital and passive income more time to snowball.

Third, I'm healthy. You can be 36 years old and in terrible health. I'm not. I have
a lot less stress in my life due to the lack of a stressful job/schedule. I wake up
when I want and do whatever I want. I have nothing to stress about, and stress is
a silent killer that tears health apart. Furthermore, I work out six days per week,
because I have the time and passion for it. Plus, I live in Thailand where the food
is healthier, and served in smaller portions, than what you get in America. Thai
people aren't extremely thin by accident. They're not eating pizza and
cheeseburgers.

Fourth, and perhaps most important, I now live in a place where healthcare is
substantially cheaper. I'd go so far as to say healthcare here can be as much as
90% cheaper than the States (depending on the issue). So even covering a major
surgery here - if such a thing were needed, which is unlikely - wouldn't
financially impact me that much due to that much lower cost structure.
I've even documented my firsthand experience (including costs) with a local
Thai hospital: http://www.mrfreeat33.com/my-recent-experience-with-visiting-a-
hospital-in-chiang-mai-thailand/

I would never try this in the States, not even with my resources. That's because
healthcare in the US is astronomically (and ridiculously) expensive.

The healthcare issues alone make it, in my view, a nonstarter to even consider
living in the US. I couldn't imagine living in a place where one major health
disaster might cause great financial distress (or even wipe me out). It's crazy.
That's not a place where I'd be comfortable living.

And that's why this plan exposes you to that potential for the least amount of
time as possible (I'm assuming you have US health insurance through your
employer/job in the prior steps).

All that said, maybe you're not comfortable taking on that risk completely alone.

The good news is that you can buy a pretty cheap international catastrophic
insurance plan, then stick to covering just the basics on your own.

The insurance itself should be low cost due to the cost structure of living abroad.
And the basics should also be quite cheap, too.

For perspective on this, a basic doctor visit here in Chiang Mai currently runs
200 baht (that's $6.07, or less than 90% cheaper than the US) when paying cash.
Also, antibiotics often run just $1 or $2 per round (and usually do not require a
prescription).

That's easily affordable for someone retiring over here with $200,000+ in assets
and at least $750 in monthly passive income.

Of course, you'll probably be sitting on a lot more than that if you follow these
steps correctly.

You'll probably be sitting on a ~$250,000 portfolio generating over $12,000/year

in passive income, along with a mature side hustle that's bringing in hundreds (or
even thousands) of dollars per month and plenty of purpose, happiness, and
meaning to your life. This will allow for a very comfortable life in many, many
places in the world.

And then you'll have it made in the shade, just like I do.

Warren Buffett once said: "Someone is sitting in the shade today because
someone planted a tree a long time ago."

Shade is wonderful, but I don't think it's necessary to wait a long time.

This guide could allow you to build your own shade - and actually enjoy it while
you're still young.
 Conclusion

Is this guide for everyone?

No.

This world wouldn't be a very nice place to live in if we all wanted the same
thing, all lived the same lifestyle, and all had the same ideas.

But if you really want to retire very quickly and/or very early in life, I
wholeheartedly believe these five steps could put you in a position where you're
wealthy enough and generating enough passive income to retire and live the life
of your dreams. And these five steps, if followed correctly, could do that in just a
few short years.

I say that as someone who followed these same steps.

How did it work out?

Well, I was an unemployed college dropout at 27. I was worth less than $0.

Then I started following these very same steps.

I was able to quit my job at 32, become financially independent at 33, and
indefinitely move abroad at 35 to live out my early retirement dreams.

I went from below broke to financially independent - zero to hero - in six years.

And I didn't even do it as fast as I could have.

A big reason why is, I didn't have a book like this guiding me step by step.

But you do!

Don't race the other rats. Don't follow the cheese into a mouse trap, clamping
down on you and handcuffing you to a life of stuff, emptiness, and captivity.

Don't allow society to box you in. They want to label you. Don't let that happen.
If you let them box you in, you end up in a box... until you die one day and
literally end up in a box. Think outside the box so you don't end up in one.

Don't buy stuff you don't want or need, with money you don't have, to impress a
bunch of people you don't even know or care about.

Don't own stuff if you don't yet own your own time.

Your time is your most valuable asset. It's life itself. If you choose money over
your life, you're setting yourself up for disappointment. If you chase the dollar, I
assure you that you will never catch it.

But if you learn to control money, you can control time... and life itself.

You open up a world of options, opportunity, flexibility, and freedom.

You can build a life that's customized for you and by you.

That's real wealth. That's real power. That's real happiness.

I wish you the best of luck as you walk that path toward a wealthier, healthier,
and happier version of yourself.

Visualize that future version of yourself. See that person as real - because it one
day will be you. Will your future into reality, and don't let anyone stop you.

I'll be waiting for you on the other side.

Sincerely,

Jason Fieber

www.mrfreeat33.com