It may sound a bit corny, but you are your own best investment.
Investing in yourself first will almost certainly be the best investment you ever make. Think of it this way: If you're earning $30,000 per year, it's going to take a lot of scrimping and saving to invest even $5,000 per year. But at $60,000 per year, you could easily invest $20,000 and still have a sufficient amount left over to live on. That's four times the amount you could have invested otherwise. The stock market isn't going to give you those kinds of returns. But for as long as you stay employed, whether it be for 10 years or 20 or 30, you can count on similarly amazing results year after year. How many other investments can make that claim?
Imagine for a moment what it would be like to have a salary double what you're earning now. It's not impossible, especially if your current salary is $30,000 or less. Just picture it: If you were earning $60,000 then with a little self-discipline you could continue living at the same (or slightly higher) standard of living while investing the rest toward rapidly achieving financial independence.
If you find yourself in a low-paying or dead-end job, you simply have to remedy that situation first. You may be the hardest worker in the world, but if you're in a field that pays low wages, you're going to find it tough sledding at best. So instead we suggest you focus your work ethic on yourself first. Just be sure to choose a practical career path that will rapidly bear fruit afterward.
Biting the bullet and retraining
Our own story serves as a good example. My wife was in a dead-end career as a travel agent, earning less than $15,000 per year at a job that was quickly becoming obsolete. It was 1998, and we had been saving for seven years -- nearly half of a 15-year plan we had put together for early retirement -- and yet we still only had a nest egg saved up of about $68,000.
Robin realized she needed to invest in herself before she could do much to help with investing for our retirement. So for a year and a half she went back to school again to reinvent herself and become a nurse. She passed her prerequisites at a local community college, got accepted to a rigorous one-year accelerated nursing program, and wasted no time getting hired as a nurse straight out of college. She immediately put her newfound skills to the test starting in 2000.
The one-year nursing program set us back $20,000 (plus the lost opportunity cost of her being unemployed for a year and a half and not making the $15,000 per year she otherwise would have made). We had to borrow $10,500 in Stafford loans and another $5,000 from the bank to help cover the education costs. There we were, right in the middle of our primary investing years, and instead of earning money, Robin was spending it on re-educating herself. But it was a necessary expense, and we both knew it. She had to invest in herself first, and we trusted that in the long run it would be a worthwhile decision.
And it was. In her first year of nursing, she more than doubled her previous salary. She went from making $15,000 as a travel agent to earning $39,000 as a nurse. Just six months after she finished her nursing program, we had already managed to pay back every cent of the loans.
By the following year she was making $45,000, and the year after that $50,000, and onward and upward. Now she was earning a salary that could genuinely help us to invest for early retirement. Furthermore, she had suddenly become eminently employable. We could live anywhere in the country and know she could find work. And if we were to retire early and discover our finances were too tight, we knew that in a pinch she could fall back on her nursing background and find temporary work to tide us over.
This gave us a newfound sense of confidence. We ended up being able to retire in 2006 at the age of 43 -- two years earlier than originally planned -- in large part because we knew both our careers offered good opportunities for temporary employment should it ever become necessary.
Choosing a practical career
Investing in yourself first means getting an education in something practical that you know ahead of time will pay well once you graduate. The education may be expensive, but if you know there are attractive jobs that pay well and are in high demand on the other side of that education, it will be worth every penny you spend on it and more to make it happen.
The education we're talking about isn't necessarily a four-year degree at a college or university. It could be if you have a specific career in mind that expressly requires it. But before you go down such a long and financially arduous path, make sure there is a strong demand for workers in that field, that the only individuals who can fill such jobs are people with the education you're about to get, and that the jobs pay highly enough to justify such a prolonged and costly effort.
Otherwise, there are plenty of careers that pay reasonably well but call for a more focused set of courses that can be completed in a year or two. Just type "career over 50K" into Google to start brainstorming the possibilities. You don't need to become a doctor or earn an outrageously high salary to retire early, but you do need to have a job that pays a decent wage -- say, in the $50,000 range.
Be sure to do your career homework before going down any particular career path. First and foremost, make sure it's a job you can stomach doing. Robin did her career homework before she became a nurse. Early on in the process she shadowed a nurse for a day, talked to other people who were LPNs and RNs, and learned from them which nursing programs were most highly respected. During her education she got plenty of hands-on experience in clinical settings, so she already knew what she was getting herself into by the time she got her degree.
Supercharging your investments
Once you make the switch to a better career, all things become possible. With Robin making $50,000 per year, we could live on her salary alone and invest all of my salary. Suddenly we could take giant strides forward. We did most of our really good investing after Robin's nursing career got underway -- and that wasn't until more than halfway through our 15-year plan. At that point we were firing on all cylinders and were able to sock away significant amounts of money in a relatively short period of time.
Imagine if Robin had begun her retraining at the beginning of our retirement planning. Instead of seven years of higher wages, we might have had 14 years of solid earnings helping us along on our path to financial independence.
Our original retirement worksheets woefully underestimated just how much our salaries would grow -- and how much extra money we would be able to invest as a result. We had to revise our yearly savings estimates significantly upward in order to account for the new reality of two jobs paying solid wages. You may likewise find yourself pleasantly surprised on the upside. Do what you can to supercharge your career, and you'll end up supercharging your investments as well.
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