This is a guest post from Pauline of InvestmentZen.com, a site that helps you grow your net worth with simple, actionable steps. Pauline escaped the rat race at 29 to live life on her own terms, and is now a location independent blogger and entrepreneur with a home base in sunny Guatemala.
To anyone slightly interested in money, the end goal is always financial independence. The moment when your investments take over, and generate enough passive income for you to kick back and relax for the rest of your life. In order to do so, and make sure your nest egg lasts forever, investment gurus recommend you withdraw no more than a safe 4% out of your portfolio every year.
Meaning if you need $5,000 a month, or $60,000 a year to live comfortably in retirement, you must create a $1,500,000 portfolio. That is equivalent to 25 years worth of living expenses.
Investing To Reach Financial Independence
With interest rates near zero on savings accounts, your best bet is to invest. Markets have yielded over 8% historically, and while savings accounts are safer, they will barely allow you to keep up with inflation. When investing, stick to easy and simple. Low fee index funds will do it. You don’t need to understand much, just to invest money every month for as long as you work. One thing you need to understand though, is that there is a hierarchy on how you should prioritize your investments. You always want to favor the ones that will give you the best returns first. And that is done via a mix of tax advantages and employer matches. [Read the full article]