How much is enough ? (part one)

This is THE critical question for FF. Unless you can answer it, you will never know if you are there or not, and you will never have a concrete goal to aim for. Anyone seriously seeking FF should have a specific answer to this question, i.e. a net worth figure and a target date.

Source of image: theintentionallife.com

Initial research

I’ve spent a lot of time on this recently. Obviously before quitting the career and packing up everything to head home after nearly two decades, it’s important to be sure of what you’re doing. The 2008 Global Financial Crisis is still fresh enough in mind to factor in a safety margin.

While I was reasonably confident I had enough, I started doing some research to try and “make sure”. What I managed to find was various numbers on what it costs for a couple to retire, e.g. “The Association of Superannuation Funds of Australia releases a guide to how much retirees need for retirement. They reckon a “modest retirement” is $23,489 for singles and $33,784 for couples. Yet who wants to be modest in retirement? To have a comfortable retirement (holidays, nice wine, trips to the flicks), you’ll need $42,597, and $58,326 (couples). “ – Barefoot investor, 13 Jan 15

Here is another version with four lifestyle categories :

No.	Lifestyle	Single $ p.a.	Couple $ p.a.
1	Doing OK	22,500	32,500
2	Comfortable	32,000	44,500
3	Doing Well	41,000	56,000
4	Premium	54,000	71,500

(Source: Sunsuper, Suntracker brochure)

Of course, most of these guidelines are for the average single or average couple in Australia. You will be hard pressed to find general guidance for a couple in their late 30’s and with young kids, aiming to retire 25+ years before the typical age. And furthermore, it was only answering part of the question (i.e. how much you will spend, rather than the bigger question of how big a nest egg is needed to fund this spending!)

I also found some very extreme guidelines, e.g. “when you can live on the interest on your interest” –mentioned in “ The Rules of Wealth”, Richard Templar. And I thought I was being conservative! That’s an extremely stringent target especially in this recent environment of ultra low interest rates. Even assuming Australian interest rates of say 3% (which are very high versus other developed countries), that works out to 0.03 x 3% = 0.09%. Taking the modest couple requiring $33.8k p.a., they would need $38 million according to this ! And I didn’t even allow for taxes in the calculation!

Still searching for peace of mind before taking the plunge, I decided to take advantage of the free financial advice offered by my industry super fund. This was a worthwhile experience to get myself organized, but the complimentary financial check-up in no way answered my specific questions on early retirement, and I was not keen to shell out extra money for the personal financial advice offered.

Finally some answers

So I continued my search online, and it was a very rewarding and enlightening bonus to discover the world of FIRE (Financially Independent Retire Early). I never knew there was a community of bloggers out there writing about this, the very same thing I had set out to do all those years ago! And in particular it was very valuable to find Mr Money Moustache (MMM), which I have found to be an excellent resource and have been going through it in some detail these past few months. It was only on this website that I managed to find quality information that I felt was applicable to my circumstances, albeit with geographical translation needed from US/Canada to Australia.

So what does MMM have to say on this question :

“The 4% Rule: The Easy Answer to “How Much Do I Need for Retirement?

The answers you get to this question vary widely. Financial beginners (about 95% of the population) tend to randomly just throw out a number between 5-100 million dollars. Financial advisers who aren’t Mustachians will tell you that it depends on your pre-retirement income, (with the implicit assumption that you are spending most of what you earn) and the end answer will be somewhere between 2-10 million.

Financial Independence enthusiasts will have the closest-to-correct answer: take your annual spending, and multiply it by somewhere between 20 and 50. That’s your retirement number. If you use the number 25, you’re implicitly using a 4% Safe Withdrawal Rate, which is my own personal favorite number. “

(Source : MMM The 4% Rule )

It was a relief and gave me a lot of reassurance to find someone who spoke logically and specifically to my questions on early retirement. As I said before, nearly all the general information out there simply doesn’t apply to people still in their 30’s and with young kids.

Example

So how does one apply this? Let’s go through an example of how I would approach it…

1) Take current annual spending e.g. $44,500 (Based on a “Comfortable Couple” as per Sunsuper).

2) Assume a multiplier, let’s chose 40 (A safety margin over MMM’s preferred 25, but still within his suggested 20-50 range).

3) Do the multiplication: $44,500 x 40 = $1,780,000

[ Note: I didn’t consider income tax, but with an income of $44,500 split between a couple of two, the tax rate should be relatively low. Also considering I have been conservative in the multiplier assumption, any taxes should be covered by this safety margin ]

Just to be clear, what exactly does this “retirement number” mean? In my case as a home owner, it is the amount of net worth needed over and above owning my own home outright (mortgage fully paid off). Some might include their own home in net worth and that can be appropriate in some cases. But from a retirement perspective, your home is not an asset providing passive income, and so it does not contribute to this retirement number.

Potential Pitfalls

Please note that home ownership is not mandatory for FF. If you choose to rent, then the above process still works, you just need to ensure rent payments are included in your current annual spending.

The above is an illustrative example only. Obviously you will need to consider different assumptions fitting your individual goals, circumstances and risk tolerance. And accept that it will never be perfect. Of course you could use much more complicated discounted cash flow and statistical models. Please accept these will be imperfect too and I wouldn’t have much more confidence in them based on the track record of most economic forecasters who use such models. In the absence of a crystal ball, a simple and understandable approach suits me fine.

As with any model, it’s only as good as the assumptions and thinking which underpin it, and it can be open to both use and abuse. Try to approach it with an open mind and no pre-conceived outcomes. You will only be deluding yourself if you fudge the numbers. For example, say you are desperate to retire early, so decide on a 30% reduction versus current annual spending (e.g. $20,000 instead of $28,000) and assume the minimum multiplier of 20 to give a retirement number of $400,000. This might serve as a data point for reference, but it’s not prudent to go and quit your job and retire early based on this calculation alone. Before taking such a major life decision, it would be strongly recommend to test the robustness of the assumptions, i.e. 1) try living for at least 6 months on the 30% reduced budget and see if it is really do-able and sustainable, 2) check the average after tax returns achieved on your investments and see if it is in line with the 5% (plus inflation) implied by a multiplier of 20, 3) seek professional financial advice.

Another potential pitfall is the opposite scenario, where the retirement number calculated is so huge that people are de-motivated and possibly give up at the outset. If you experience this, I can only suggest breaking it down into smaller chunks. Every journey begins with a single step. It may seem impossible to reach $1,780,000 when you are starting from scratch. But if you look over 25 years on a straight line basis, that’s $71,000 per annum, which is already much less intimidating, although still a very large number. In reality, most net worth trajectories are far from straight line. Wealth tends to accumulate more rapidly in the later years due to compounding. Try to take a leap of faith and give it a shot. There is not much to lose – even if you don’t quite reach your goals, I’m certain you will still be far in front versus not having bothered about any of this.

Conclusion

The key takeaway message from this post is to spend the time and effort to calculate your specific “retirement number”. Once you have this, FF will no longer be a vague pipedream, but gets transformed into a concrete personal goal with a clearly defined finish line. And now the choice is yours, if you are ready and willing to commit or not ?

Buying a car

After writing on heavy topics like the definition, theory and psychology of FF, it’s high time for some light relief and this post will be about the more practical issue of buying a car, which is very topical for me right now

 

 

(Source of image: http://conversation.which.co.uk/transport-travel/are-car-clubs-cost-effective/ )

The car is often described as the second biggest purchase you’ll ever make. And for many people it’s much more than a transport device, but a source of pride and pleasure. However in my case let me tell you up front that I’m not a car enthusiast. For me, it’s really just to get from A to B. So based on a clinical, economic approach, then how does one go about buying a car ?

As with most purchase decisions nowadays, one is immediately confronted with many choices :

·         Buy or lease?

·         Borrow or pay with cash?

·         What type of vehicle?

·         New or used?

·         Dealer or private seller?

Let’s go through these one by one, but firstly we should start with the basics. Sticking with the economic viewpoint and ignoring any personal sympathies or biases towards cars : It’s important to realize that a car is a liability, not an asset.

[Aside : If I recall correctly, I first learnt this concept from Robert Kiyosaki’s well known classic Rich Dad Poor Dad. I gather this book might be a bit taboo nowadays, but I also read on Early Retirement Extreme’s blog that he had listed this as one of his top two books. So this gives me comfort to come out of the closet as a fan of this book. ]

The reason to view a car as a liability is because it does not generate income, depreciates in value, and incurs ongoing costs. Now, there is an argument that one might “need” a car to get to work and earn salary. I acknowledge this might be the case, although one should also consider public transport, cycling, etc. Others might also argue that some vintage cars could appreciate in value. Anyway let’s not get stuck in these ratholes, if I can ask you to indulge me in this general notion of a car as a liability. Following directly from this, most financially educated and disciplined people will never borrow to fund a liability. Please note this does not imply you should always borrow to acquire assets! But at least it is an option to consider in the case of assets, provided the alternatives and risks are clearly understood.

So these basics enable us to answer the first two questions… Buy or lease? Borrow or pay with cash? Since a car is a liability and we should avoid borrowing for liabilities, therefore you should save up and delay the car purchase until such time as you can afford to buy with your own cash. It might not be the answer most teenagers itching for their first wheels will want to read, but I’m afraid it’s the only logical way if you have any serious ambition of FF. Delayed gratification is a very important habit to develop.

Next on the question list: What type of vehicle? Well, this is a personal question. As I declared at the beginning I’m not a car guy. If it’s a personal passion or hobby, you may have many other criteria to add into your decision making. And anyway in this case it probably won’t be a purely economic decision. But as for me, the type of vehicle is purely determined by our needs. The internet is a powerful tool and car sales websites are very useful. I recently went through the process and was hugely impressed by the search functions available. You can enter your location, maximum price budget, minimum number of seats, auto/manual, vehicle type (sedan, wagon, SUV, etc) and any other requirements you might have. Just keep tightening the search until you get a small enough number of cars to conveniently look through, e.g. 30 or 40. I also added things like maximum mileage. You get the idea. Basically sit down and think about your needs from the vehicle. Use a car sales website to search for vehicles that meet your needs. And then keep recycling back to finetune your search, as sometimes looking at vehicle ads leads to other ideas or re-consideration of needs/preferences. Hopefully after a few loops you will narrow down to the type of vehicle you want. This process takes a bit of time and effort but is well worthwhile. It means you will have ownership over the decision after exploring the various options available, which is much better than just asking your best buddy’s opinion, or buying the same car as your folks have without thinking.

We are making good progress. Now we know what type of car we will buy and we have committed to save up and fund the purchase with cash. The final step is the buying part… New or used? Dealer or private seller?

Firstly, a bit of my personal background and baggage. My parents are strongly of the “new car” philosophy. When I bought my first car as a 20 year old, I just followed in their footsteps and bought new. This car lasted me about 5 years after which I sold it second hand for roughly half the purchase price, due to overseas relocation. Overall it was a happy first car experience, but equally I could not help but notice the rapid depreciation in value. After this time, I was “lucky” to live in big cities with very handy public transport systems, and we decided to live without a car for the next decade! This is lucky in the financial sense of avoiding a liability for ten years, but I will admit there were certainly times that I missed the joy and convenience of driving. Anyway, the days of being carless are now over for us, and with much more experience and opinions of my own, I am no longer a new car buyer. The reason is simple. Most of you will have heard people say that new cars lose 10/20/30% of their value as soon as you drive out the showroom. I don’t know the exact percentage and it might depend on the make/model, but even if it’s 10% at the low end, this seems a serious waste to me.

If you’re still with me up to here, we are now ready to secure our desired used car, but should we buy it from a dealer or private seller. I would be open to either, but based on the limited sample of two used car purchases that I have made, both were from private sellers. The first one has turned out well (for a year at least!), and the second one just happened so I can’t tell you yet, but let’s keep our fingers crossed. Clearly there can be more comfort buying from a used car dealer, as you should get a small warranty period up to one year. However, the better value is often from private sellers, since dealers will include additional margins in the price to cover costs and achieve profit targets. Most private sellers do not have such business constraints and merely want to dispose their vehicle to the best paying buyer.

There you have it, all questions have been answered (Buy or lease? Borrow or pay with cash? What type of vehicle? New or used? Dealer or private seller?)…..

Well, actually there is probably one more important question to address at the higher level : How many cars to buy for your household ? Again this is obviously a personal question and heavily dependent on your situation and needs. But my simple answer would be as few as possible and to err on the side of having less cars than needed instead of more. The reason again is straightforward, a car is a liability, one should minimize their liabilities. As mentioned earlier, we lived without a car for over ten years and I believe this considerably helped our progress towards FF. Sorry for stating the obvious but while this is common sense, my observation of what many families do is quite the opposite. They seem to accumulate cars and have a bias to have more cars than needed, just in case someone comes to visit, conflicting appointments at the same time, etc. In my view these are not good reasons to have an extra car (and all the costs and time drains that accompany it). Your guests can always hire, and you can always re-schedule appointments, make arrangements to car pool etc. The money you will save can pay for quite a few taxi fares if needed.

This is turning into a lengthy post, but moving into the final part I would like to summarise my recent car purchase. We started with very vague ideas of possibly a light SUV or station wagon, and while we would prefer one car only, we might opt for a second car for convenience and since many families with two kids have two cars. After some searching, discussion and iteration, we gradually converged to the view of a single, bigger car with 7+ seats to allow us to take day trips with extra flexibility. Avoiding the second car is a huge saving in time and annual costs (rego, insurance, servicing, etc). Having narrowed our criteria, it left us with two basic options, either a medium SUV (7 seats) or people mover. SUV’s seem to be all the rage nowadays, but for us we definitely won’t be heading offroad and 4WD seems over the top to me for city driving. SUV’s also tend to be heavier and less fuel efficient than equivalent people movers. Finally, people movers tend to be a bit more spacious, especially comfort levels in the rear row of seats for any extended journey. Therefore, we finally knew our target, a 7-8 seat people mover. Up until now I haven’t mentioned budget as it isn’t really a huge constraint for us these days, but we had discussed $25,000 as maximum and $20,000 as the desired target. After a week or two of searching, we found a car that fit our needs perfectly. Admittedly this 10 year old vehicle with just over 100,000 km was a bit older than we initially had in mind. However since it was a single owner with full service history and excellent visual condition, we were willing to give it a shot. Best of all, the price was less than $10,000, not that it was a primary consideration but obviously a very handy bonus.

Please note there is a significant multiplier effect of buying a lower cost, used vehicle. It reduces the stamp duty, the annual insurance cost, etc. Furthermore and more important to me, it helps me to relax. If I spent $50,000 on a new car I would naturally be more stressed about everything, e.g. where I park, any small scratches, young kids spilling drinks, etc. I probably also might be tempted by the car salesman to top-up on optional extras (“Since you’ve spent this much already, what’s another $2,000 it’s less than 5%). When you pay less for your vehicle, you will have less knock-on costs and you also worry less, which for me is a big plus.

Well, I think I’ve exhausted this topic. Fingers crossed this latest car purchase works out for us ! I hope this gives you some food for thought and please feel free to comment with any feedback and/or alternative views on how to go about buying a car.

Evolving perspectives of FF

So far I’ve written about my general framework and preferred pathway to FF. One of the objectives for this blog is also to reflect on my personal life transition. This post will make a start on this by considering how my personal/internal perspective of FF has changed over the years, which has been quite substantial. Apologies if it’s rambling but that can be the nature of self-reflection.

As mentioned in the very first post, when I started out my career it was all about accumulating wealth as soon as possible. Work was a means to end. And the “end” clearly in my mind was being permanently parked on a picturesque beach, golf course, or other similar pleasurable location. I guess it’s a common aspiration for many young, ambitious graduates (and even the older, less ambitious variety too!). I used to track my net worth each month in a book, and drew satisfaction in the slow but gradual accumulation of this wealth pile. I was inching towards my goal and it was an excellent way to keep focused and driven in my career, budgeting, saving and investing habits.

My mindset stayed like this for around 8-10 years. I can’t recall the exact point, but somewhere in this timeframe and approaching the 30 milestone, I noticed my perspective starting to change. In retrospect, I reckon there were a few factors involved in this. When you are starting out, the FF goal is a long way off and rather abstract. It is easy to keep your head down and focused, safe in the knowledge that you are heading in the right direction and will one day reach the hallowed land. However, once you start making tangible progress towards FF and it is no longer a dim flicker of light at the end of the tunnel, but really coming into sight, then it starts to take away from everyday focus and becomes a substantial distraction in its own right.

This can manifest in different ways, a few of the key issues I encountered were : 1) lower tolerance for work / boss ”issues” that in the past would be easily accommodated as a necessary evil, 2) questioning the end game and if I would really be able to while away 40+ years on the beach and golf course. In some ways these are good problems to have. It’s like an enlightment to finally take more conscious control of one’s life and re-discover your intent and purpose. That is of course, provided that you really know what you want to do with your life ! This can also be a disorientating and destabilizing phase. After spending the better part of a decade on autopilot and happily tolerating the daily grind for the pursuit of later rewards, it can require a huge adjustment in mind set to revisit these basic questions, especially without any strong financial motivational force. I guess it could even be like the Shawshank Redemption movie, where the freed prisoner has been in jail so long that he/she no longer knows what to do when finally being granted freedom, and might even prefer to stay in prison, as crazy as it might sound.

I struggled for a long while on this, some years in fact. Mainly it was a challenge career-wise as I lost motivation and direction. Previously my career goals were always clearly aimed to progress and grow my salary and bonuses in order to accumulate enough wealth for early retirement. I knew what to do and didn’t question it, so things just chugged along. However when I began to deliberate these issues - the need to continue, more “meaningful” pursuits, etc – the answers didn’t come so easily. There was a sense of limbo or “no man’s land”. In some ways I wish I had been braver and declared FF at an earlier point, like Mr Money Moustache and others. But I was always a bit conservative and wanting a bigger buffer or margin of safety. Also I became quite attached to my job and resident country and it was quite easy to keep postponing the decision another year. Finally as already explained, I didn’t really know what to do with myself next and wasn’t quite mentally ready for FF, even though the balance sheet had probably passed that threshold some years earlier.

I’m pleased to say that as the time of FF now approaches, the uncertainty and instability is melting away and replaced by excitement and newfound enthusiasm. Perhaps the hard part for me was deciding, as one can agonise especially over timing. It’s always tempting to defer and accumulate a bigger reserve in case of the unexpected. However, after booking the one way flight home and giving notice to the boss, the decision is now made and we are past  the point of no return. I’m looking forward to the final weeks of “salaried life”, finishing off this chapter well, and eagerly await the opening of a new life chapter in the coming months!

So in reflection, there has been a massive change in what FF means to me. The initial dream of hedonistic life was useful to put me on the path and stay motivated. But as I started to make serious progress, the reality also came to me that it would not be satisfying to park on the beach for decades. This was disorientating because 1) it meant I had to find a new end goal, and 2) substantially brought forward the timeframe for FF. The second point is due to the huge difference between assuming no further employment income and an opulent lifestyle, versus some continuing employment income and a moderate lifestyle. Gradually I have recalibrated my idea of FF and the key point is being Free to choose if, what and how one might work. Not necessarily that you will never work again. I am really excited about the possibilities of working in areas where I have a deep passion, genuine interest and the chance to directly help people in need. Of course these possibilities always existed but before now my priority was Earning, which led me to other pursuits instead…….

This has been a longwinded post but if I were to draw one key conclusion it would be that there is a lot of psychology that supports (or can derail) ones progress to FF. It’s important to be aware of your own internal dialogue, assumptions and motivation, as well as how these will change over time and as you get closer to FF.

A Better Pathway to Financial Freedom

Previously I have given my definition of FF (post 2), and suggested that any shortcuts to FF should be viewed with a good deal of caution (post 3). Get rich quick schemes cannot be rejected altogether. They are a valid pathway to FF but only for a small minority. But I do not believe they will be suitable for most people. I will describe here what I consider to be a better pathway to FF.

Once again I refer back to the waterfall diagram with the four basic money buckets. You might ask yourself : Which is the most important bucket you should focus on to achieve FF ?

This is a good question to stop and ponder. It might be impossible to answer categorically, as it will differ from person to person, but let’s have a crack nonetheless. I have already given my view it’s best to start at the top of the waterfall and not the bottom (i.e. Investing). But it’s more difficult to say which of the top two buckets is more important, Earning or Spending. There is an element of chicken and egg here, and I’m sure many would contend that Earning should be the first focus, as you can’t spend until you’ve earnt…  While there is some logic to this, if I had to pick the one most important bucket for FF it would be Spending. In the long run, the most important driver of FF is spending your money wisely with value in mind and avoiding the so-called “lifestyle creep” / materialistic culture that has become so pervasive.

Books such as the Millionaire Next Door have done an excellent job in making this point and revealing the common misconception that it takes money to make money. The Mr Money Moustache (MMM) blog is another excellent resource that focuses on Spending bucket as the critical priority. Think of it this way, the objective to the FF waterfall is to generate enough water to fill your Spending bucket. So the smaller you can make your Spending bucket, the easier this task becomes. I saw this quote recently which neatly sums it up : "How happy a person can be, is not how much one has but how little one needs...."  (source unknown)

We could also consider a sporting analogy and the well known cliché “Offense wins games but Defense wins championships”. Obviously both are essential, but when it comes to the crunch, controlling your Spending (i.e. Defense) is more critical than maximizing your Earning (i.e. Offense).

Now before you jump to the wrong conclusion, I am not necessarily advocating frugality, which might work for some but probably won’t be enjoyable or sustainable for most people.  I’ll repeat again what I said earlier : Spend money wisely with value in mind and avoiding “lifestyle creep”/materialism.

Close on the heels of Spending, the Earning bucket comes a very near second in the FF pecking order. By focusing on this bucket you can increase the flow from the very top of your waterfall. How can you do this ? Get a good education, prioritise your career, continually develop yourself, build a strong professional network, seek advice from a mentor, etc. These are the first ideas that spring to mind and I’m sure you can think of many more ways to sustainably grow your salary/wages. I will highlight the word sustainable. Please keep a long-term perspective and think very carefully before job hopping excessively or delivering ultimatums to your boss (e.g. I need at 10% payrise or I’ll have to leave and join XYZ company). Sometimes these short-term increases in Earning can compromise your long-term potential by damaging important relationships and even worse, your reputation.

I hope this post is relatively obvious and intuitive. Nothing from left field, just a very straightforward and logical approach :

1) manage/control your Spending

2) sustainably grow your Earning

è both of these actions result in more surplus money each month for your Saving and Investing

Over time your investments and active earning will continue to grow and compound interest will start to work its magic. You will need to fight hard against the temptation to increase your spending habits in line with the surplus funds at your disposal (“lifestyle creep”). And if you’re patient and consistent in following this simple recipe, you will definitely make big strides towards FF. It won’t happen in a few years or maybe not even a few decades, but it will happen eventually and much sooner than if you had not taken this “better pathway to FF”.

The Shortcut to Riches

I guess some readers might not be too concerned about the details of FF and really just want the answer to this question : What is the shortcut to riches / How can I get rich quick, etc. So let me cut to the chase and tackle this in post number 3.

Certainly there are many people and companies offering attractive “solutions” to this problem all the time. I’m sure you have all seen adverts to:

·         Become a property tycoon. Accumulate 20 investment properties in 10 years and live off the rent forever

·         Day trade foreign exchange using a “proven” system

·         Work from home as an internet entrepreneur and rake in the cash from your laptop

·         ……

So, which of the above approaches would I recommend ?

I’m sorry to say none of them, and that goes for lottery tickets and the casino too ! While these activities might be suitable for a minority of specialized people, who have the passion and capability to be successful in the particular niche, I do not believe they are good strategies for the average person pursuing FF.

In my opinion and based on my experience, the best shortcut is to avoid all such shortcuts. Now I fully appreciate this might be a disappointment to those who were expecting a more upbeat, exciting or revelatory post. It is human nature to look for the shortcut and everyone is tempted by the idea of getting more for less. Some might also suspect there is a hidden secret or magical formula, known only by the wealthy few, and if only this could be discovered.

While I am all for enthusiasm, optimism, and entrepreneurship; these need to be grounded by realism and a healthy skepticism. And for those looking for excitement in their life, I would suggest this might be better sought in other areas such as social, sport, travel, hobbies, etc. For the vast majority, it’s preferable to be steady and even boring when it comes to money management.

Referring back to my earlier post “What is Financial Freedom”, these get rich quick schemes all tend to start at the bottom of the waterfall. The approach is how can I accelerate my Investment (bucket 4) and achieve better returns than normal. It also might involve borrowing money to leverage these investments, e.g. investment property loan, margin loan for shares. This might be considered as negative Savings (bucket 3). So far we are touching buckets 3 & 4, and neglecting buckets 1 &2. Another way of looking at it is : “Since my waterall isn’t flowing fast enough I need to tap into another water source and fill up my Investment bucket faster !”

Now don’t get me wrong, these approaches can work in some cases and there may be valid examples of it. However in my opinion they involve a high level of risk and are not the best approach for the majority. So what then would I suggest ?

Focus your efforts at the top of the waterfall, not the bottom. If your waterfall is not flowing fast enough, the first thing to consider is what steps you can take to increase Earning (bucket 1) and/or decrease Spending (bucket 2). If you do this well, then buckets 3 & 4 will take care of themselves especially with compound interest on your side over the long term. This is a much better pathway to FF which I will discuss in more detail in the next post……

Meanwhile please feel free to comment and share any experiences you have had, either good or bad, with get rich quick schemes.