Hustle in your 20s to be financially independent in under 10 years

Hustle in your 20s to be financially independent in under 10 years

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Sometimes it seems impossible to reach financial independence. That kind of thinking is wrong — you can easily do it in less than 10 years.

You’re awake for 16 hours a day, 112 hours a week. What do you do with your time?

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Throwing around some numbers, it’s around an hour a day to eat, an hour at the gym 5 times a week to stay healthy and active, an hour a day for your commute, 8 hours a week to hang out with your friends, roughly 30 minutes a day on hygiene related activities (bath, shower, brushing teeth, floss, etc). If we assume you’re living a normal, healthy life, then let’s say there are 84 “free” hours based on the above.

For the average person who works a 9-5 (we’ve accounted for commute time in our scenario above), that leaves 44 free hours in the week. Where does it all go?

Apparently, the average American watches 5 hours of TV a day. If you take all this free time and apply it to a side hustle or a second job, you’d retire in less than 10 years.

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Let’s say you’re an average American household and you make $60k a year and live in Houston. Monthly expenses (see below) average out to $2,700. This seems like a comfortable number, and if you went super frugal you’d be able to retire much earlier.

You contribute $18.5k a year to you/your partner’s 401k. Your employer(s) matches you 50 percent up to 6 percent of contributions (average American match), so that’s an extra $1.8k. You then contribute $2k to your HSA, to cover potential medical expenses tax free.

Why am I only contributing to the 401k and HSA here?

In this example, I’d contribute to your 401k first because your taxes post-retirement will most likely be lower. You’re allowed to contribute 18k per year per person to your 401k for 2017, so as you haven’t hit this ceiling,  you’d continue maxing it out if your household had made more money.

If had more than 36k to contribute (plus 2k for your HSAs), I’d then max out both of the household’s ROTH IRAs. With ROTHs you pay income taxes up front, but withdrawals are tax free.

Next comes an HSA, which is tax free (and FICA free!) up front, and tax free upon withdrawal for medical expenses. For this example, I’d put $2k per year in this to cover that years medical expenses in case. The reason is that HSAs cannot be withdrawn early without penalties, while there are ways to withdraw from 401ks and ROTHs prior to retirement without a penalty (72t or Roth ladder conversions).

So what’s my savings rate without a side hustle?

Here you’re savings $22,300 on net pay of $55,300 for a savings rate of 40 percent. Mr Money Mustache has a chart on how many years until retirement based on your savings rate and at 40 percent, it’ll take you 22 years to retire. You’re spending 60 percent of your working hours just to sustain your household. If you both got a second job, you’d be able to save 100 percent of that money!

What’s my savings rate with a side hustle?

Let’s say your average hourly wages for this side hustle is $15/hr for 30 hours a week. You can drive for Uber/Lyft in large cities, become a taskrabbit, tutor students, take on FBA, etc. Maybe you’re an expert web developer or you can only find part time jobs as a waitress, but for sake of simplicity, I think $15/hr is fair on average.

If we assume 20 vacation days a year, this gets us to around $22,000 per person in extra income.

If both of you open a individual 401k (i401k) for your self employment, you’d be able to put $18,800 each in your i401k. You can contribute $18,000 plus 20 percent of your self employment earnings. The other $2,000 post-tax on your self employment earnings, I’d put in an taxable retirement account.

For 2 people who are both doing this, your savings rate goes up to 65 percent, cutting your years until retirement by more than half and allowing you to retire in just 10 years. This percentage makes sense intuitively because for your real job you’re saving 40 percent of your salary. At your second job you’re saving 100 percent. In the end, it’s just a weighted average.

What if you earned $20 an hour on your side hustle? You’d be able to retire in 8 years.

Now, obviously working 70 hours a week for 8-10 years is a hard task. As you go on though, if you’re building skills in your side hustle and word of mouth is getting you new business (for things like coding, tutoring, consulting, etc), you’ll be able to charge more and either retire faster, or cut back on the number of hours to meet your retirement number. If you’re doing low-activation energy retirement jobs, perhaps you meet people who need workers for side projects and you’d get paid more.

You need to do this now!

The perfect time to work 70 hours a week is in your 20s so you can retire in your early 30s. It’s harder to do this the later on you go in life. This is because you might have kids (less time for work!), your parents/family members might be sick the older they get and you might need to spend money or time to take care of them, and the older you get, the less expendable energy you might have.

So how does your time spent per week look?

It doesn’t seem unreasonable to work 70 hours a week and retire in less than 10 years. You’d still enjoy your 20s with more than 20 hours a week dedicated to spending with friends and leisure time. You just would not be spending every free second of it partying it up or doing Netflix + chill. When you have less time, you spend it much more effectively. Delayed gratification is rewarded in FI/RE.

If you decrease your spending, you’d shave off another 1-2 years off of that 8 year timeline. Stop drinking your overpriced Starbucks coffees and make it at home, start doing Sunday meal prep and buy groceries instead of eating out, get a bike instead of using public transportation, and just start being frugal. When you’re retired, you’ll be even more frugal on accident because you’ll have so much free time to DIY.

These numbers might not be the most accurate to your situation, but you can plug in your own. You can easily figure out how much your savings rate increases, and how much earlier you can retire. The point is that a side hustle allows you to retire much earlier. This is because you can contribute 100 percent of that income to your savings instead of just 40 percent.


Author: Olivia

Olivia worked in finance and wants you to learn the secrets of financial independence. She believes there are so many ways to monetize your life and make money doing the things you're already doing because so many companies offer free money.

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13 thoughts on “Hustle in your 20s to be financially independent in under 10 years

  1. I would kill for five hours of watching TV. Not that I would actually watch TV, but to have that kind of time….

    We are planning to retire early just to get that kind of time back.

    1. Is it the kids? Trying to retire before I have them, so I can spend time with them and also have a lot of free time. Well, go hard for a few years, then watch TV for 16 hours a day! Delayed gratification :).

  2. As someone who (purposefully) got pregnant in her mid 20s, I definitely missed out on part of a decade of hardcore hustling 😉 But especially now, I realize how much time you really do have in your day if you just work a typical 9-5 job. Even hustling half of what you presented above will make a serious dent in your long term goals.

    1. Hey Angela! Ahh, definitely rest up for those who are pregnant! There’s time to hustle later in life too:).

      It’s so true, a ton of people I speak to are like, “I work 40 hours a week, that’s plenty!”. But if you only worked a few more (or a lot more) hours a week at your side hustle, you’d retire so much earlier! And my numbers up there are SUPER conservative. I mean, $15 is min wage for SF and it’s going to be min wage for NY in only a year. I’m sure the people who are going to try and FIRE/read this blog can do much better!

  3. I sooo wish I read this blog post 10, 13 years ago when I was starting in my 20s. Still, I feel like I can “hustle in my 30’s so I can be financially independent in my 40’s”. I’ve read a lot of FIRE material recently, and quite a few FIRE people do indeed reach FI in their early 40’s.

    1. Definitely true :)! Was just trying to show the people my age that we could retire sooner! You’re well on your way, even by just reading FIRE blogs and being involved in the community, so I have faith Joe!

  4. Not intended to take away anything from the message but you can’t contrinute another 18k to the individual 401k if you already max it out at your regular job. You can still put 20% of your SE earningsas employer contribution.

    1. That’s simply not true. Ask a CPA, you’re entirely allowed to do that. You could theoretically put $109k per year into your corporate + individual 401ks. $54k in each if you can earn that much and also get your employer to have an incredible match.

    1. You’re misunderstanding. You can have a i401k and a 401k at the same time and theoretically contribute up to $109k for 2018. See here for more details:

      If you have multiple 401ks, you’re only counting the corporate ones where you do not have majority equity. A i401k is DIFFERENT and not included.

      I’m not sure about 457 plans, that’s not a 401k at all.

  5. You would have to open a SEP- IRA to contribute more than the 401k limit. Here is a section from FS post that proves my point:

    The idea is to open a SEP-IRA as an independent contractor/business owner if your employer has a 401k program, and vice versa. If you open up a solo 401k while already contributing to an employer 401k, then the max you can contribute is $53,000 combined.

  6. I only wish I could make $15.00/hr at my 9-5. I moved from Montgomery County Maryland to rural western VA in February. Maybe my husband and I should have thought out that move better. In Montgomery County minimum wage is $15.00/hr but where I am now it’s only $7.25/hr (Federal standard). Normal hourly wages for local jobs are around $12.00/hr, ugh!

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