Ramen Retirement is about taking your life to the next level – while the focus is on sorting out your finances, it is in service of a higher goal, to free your time so you can discover and share you gift with the world.
It’s both frustrating and sad that in 2018 the vast majority of people go through life just ‘getting by’… ‘Making ends meet’. Dependent on a paycheck, most people never have the time or mental space to explore their interests, strengths and desires. This is a personal tragedy, and a societal waste. How many incredible artists, inventors, entrepreneurs, scientists, and philosophers are idling away their time and gifts, working for mediocre companies, pursuing middling goals, amounting to little more than a 10% bump in year over year profit? All so they can put a roof over their head, and a little food on their children’s plate?
The myth of traditional retirement
What happened to the promise of 15 hour work weeks, time for leisure and creative expression, an improved quality of life? If we’re so much further ahead from where our grandparents were a century ago, why does it feel like we continue to fall behind? Why do we still have our nose to the grindstone?
The problem is that mainstream media has convinced you a better life is out of reach. Temper your expectations. Curb your enthusiasm. Save a little money over time, and one day you too can retire in the twilight of your life. At the ripe age of 65 you can finally start living. Those retirement ads are a scam. Who do you think pays for all those billboards and TV spots? Someone is making money selling that ‘dream’. Guess who they’re making that money from? The folks who fall for that narrative.
I know all about this fraud. For much of my life I bought into it. Even as someone with a deep background in business, finance and investing, I drank the Kool Aid. It was only when I stepped back and looked at my situation that I realized there had to be a better way: my wife and I are what most would consider high earners, but even with our fat paychecks, the idea of making enough from traditional investments to break free from the rat race was impossible. It was a pipe dream far off in the future.
The distant future is an illusion. Life is short. We don’t know how long we have. Even assuming we make it to 65, do you want to save all your leisure and personal growth for at most a few decades of declining health?
The problem with most financial advice is that it will only get you so far. It’s designed for the ‘retire at 65’ pipe dream. But if you’re like me, you want ‘No Thanks’ money, today. ‘No Thanks’ money is just enough passive income to cover your basics and give you the freedom to take on more risk, walk away from the man, quit the rat race, and start living for yourself. You don’t need ‘Fuck You’ money. Sure, it would be nice, and I believe that kind of money can come to you once you reach Ramen Retirement… but you don’t need that kind of money. It doesn’t take much to live like a billionaire. The greatest luxury is freedom of time and focus. So yea, ‘No Thanks’ money is good enough for our purposes.
The promise of Ramen Retirement
The great news is that you don’t have to wait. It’s simpler than you think to set yourself up financially so you have the freedom and flexibility to break free from your dependence on a day job. The goal here is to free up your time. Not so you can chill on a beach, but so you can go on offense, go deep, then discover and share your gift with the world. You don’t need to wait until 65 for this kind of financial freedom. You don’t need to wait until 65 to start living an authentic life where you play to your strengths. Where work is play. It can be done much sooner – often in your 30’s if you follow the plan.
I say it’s simpler than you think, but that doesn’t mean it’s easy. The path to Ramen Retirement will require hard work and sacrifice. If you’re not serious about making the required sacrifices, then stop reading now. But if you’re 1,000% serious. Deadly serious. Serious about this like your life depends on it. Then you can most certainly do it. You should read on.
The path to Ramen Retirement
As I said, making ‘No Thanks’ money – or reaching Ramen Retirement – is simpler than you think. The formula is straightforward:
- Save (i.e. spend less than you earn)
- Invest those savings into inflation protected, tax efficient, cash generating assets
Earning money is simple (but not necessarily easy): make something other people want. To make something people will pay a lot for, what you create needs to be uniquely valuable. This is simple, but it’s not easy. To create something uniquely valuable, you need a unique intersection of skills and abilities. To be that sort of person, you need to invest your time and energy into acquiring the skills, abilities, contacts and knowledge that will make you uniquely valuable. Therefore, before you can earn, you need to learn. You need to invest in yourself. Investing in yourself is likely the best investment you can make of both time and money. Your earning power is the engine that will propel you through life. Every investment in yourself today will compound at a high rate for the rest of your life, which is why it’s so important to get an early start, and to invest often. You want to catch the wave of life and ride the peak of that crest for as long and as far as you can. With a solid education – both formal and informal – you’ll be well equipped to create something other people want.
Once you have the skills to create something other people want, you need to go out and do it. There are many ways to earn money, but the most common will be by selling your time and abilities to someone else. The other path is to bootstrap your own business. In doing this, you don’t want to be a commodity, otherwise you become a ‘price taker’ working for minimum wage. You want to be a uniquely rare asset to be valued and coveted – you want to have a unique intersection of skills that is valuable to someone. So the path is simple – invest in yourself, develop a unique set of skills and abilities, then use those skills to create something uniquely valuable that other people want. Do that, and money will come to you in spades.
An aside: increasing your earning power is THE MOST IMPORTANT lever you have to reaching Ramen Retirement. Yes, you can save your way to some version of ‘leanFIRE’ (living on $40K / yr or less), but I don’t think most are fit for that ascetic lifestyle – particularly if you live in a high cost of living (HCOL) part of the country. So, if you’re making less than six figures and wondering why you can’t make the math work to reach your goals, then I would suggest rethinking the earning side of the equation first.
Once you’ve figured out the ‘learning’ and ‘earning’ part of the equation, then you need to get your financial house in order. There are some basics of financial management that everyone should know and follow. Stay out of debt. Save money every month. Max out tax advantaged investment opportunities (e.g. 401K). Invest in low fee index funds. If you can do just that, you’ll be ahead of the game.
But to break free and reach Ramen Retirement you’ll need to explore alternative investment strategies – I would recommend focusing largely in the area of real estate, though there are some other unique investments that can be a good step toward financial independence. Your ‘financial planner’ won’t tell you about this stuff, because it’s not something they sell, and it sometimes takes a little more effort to dig up the right deals. But these alternative investments can generate 10-15%+ cash returns from a stable, inflation protected asset with potential for appreciation. You don’t need to be an accredited investor. You don’t need to be a rocket scientist to figure this out. I have no particular edge over anyone else in this field, but I’ve been able to make it work. These types of investments should outperform the stock market over the long term, but more importantly, they put tax advantaged cash in your pocket on day one, which is key to breaking free and reaching Ramen Retirement. You can get greater than 4X the amount of cash returned from real estate investments than you will investing in the stock market. I’m not advocating that you stay away from stocks entirely – in fact I think a healthy portion of your assets should be in US and foreign equities, but if you’re not investing in real estate – particularly before you reach Ramen Retirement – then you’re doing it wrong. Avoiding investment in real estate will mean you need to work and save 4X longer to break free. That’s the difference between breaking free at 35 vs. 65. That’s the difference between living a rich, authentic life, or one of delayed life dreams that vanish on the horizon.
In addition to making the right alternative investments, the only other assets I recommend owning will be your primary home, and a diversified portfolio of stocks. Stay away from bonds. Don’t touch complex financial products. Gold is for suckers. Do all of this with an eye toward capital preservation (never lose money), and awareness of the inevitable bouts of inflation.
I realize the approach I advocate is unique to my temperament and situation. Your mileage may vary. This won’t work for everyone, but it can work for anyone. The only thing I can guarantee is that I’ll give it to you straight. You won’t get watered down wishy-washy financial platitudes on this site. You’ll be getting opinionated advice informed by hands on experience. It’s the advice I wish someone gave me 15 years ago. Enjoy!