Retiring by 35 – Myth or Reality
December 22, 2021
My journey in the financial world started in 2006 when I was 16 years old. My dad introduced me into the world of investments in a functional sense. He prompted me to open my first deposit account in one of the biggest banks in Ukraine.
As crazy as this sounds, if you had a US dollars deposit, at that time you would get around 8-10% return on your savings. Nowadays, you’ll be lucky to get 1-2% or less. Of course, when profits get this high it means the risks are much higher too. This bank was later declared bankrupt and I only received a partial refund from Deposit Guarantee Fund for Individuals.
It’s also been a year of my first income. When I was studying at Lviv Physics and Mathematics Lyceum, I managed to earn $1000 dollars on sales of virtual assets just playing a once-popular MMORPG game Lineage 2.
Investment portfolio: national bonds, stocks, cryptocurrency, and more
Even though I studied computer science fundamentals at the Department of Applied Mathematics and Informatics, I had to learn programming languages on my own to actually code something.
I’ve enjoyed different programming languages such as C++, С#, Java, Prolog, and Erlang. No book or lecture could ever replace running “Hello, World!” popping up on the screen, or coding more complicated applications.
I’ve found the same approach in the financial area works just as well, at least for me. It’s important to understand some of the critical fundamentals but the real pleasure comes when you hold financial instruments, discover new tools, communicate with people more experienced than you, and learn from your own ups and downs.
So, at the moment, I have very different assets in my investment portfolio from national bonds and stocks to cryptocurrency and some antique items. I am collecting Ukrainian banknotes – the most valuable one is a Ukrainian National Republic karbovanets from 1917.
No magic, no financial pyramids, no lottery tickets, or any other kind of gambling.
I would call myself a conservative investor interested in keeping money safe and beating the growing inflation. My annual profitability goal is around 10%. At the same time, it is hard to resist opportunities that involve high risks such as cryptocurrency but it takes not more than 10% of my portfolio. Speaking about risk-anticipating and risk-management in investment, my approach here is wide diversification in asset classes. If we are talking about stocks, I prefer funds-based broad indexes.
I’m interested in keeping money safe and beating the growing inflation.
One of my latest investments is agricultural land. No, I am not going to grow anything there but I bet it will go up in price from 2024 when big companies come into this field. But now, the land market is limited by law and only available to individuals, and this is opening a window of opportunity.
Investment red flags
There are multiple red flags that should make you think twice before making investment decisions:
- First of all, any investment comes with its own risks, whether you are aware of them or not. There is always a possibility that you can lose your money at any time. So, if you are on pins and needles because of a certain investment, then there is probably too much money at stake.
- If return on investment is extremely uncommon for an asset class, that's another red flag. And it works both ways – high returns means you should expect higher risks whilst low returns means it won’t be you who will get the maximum profit from it.
- No magic, no financial pyramids, no lottery tickets, or any other kind of gambling. If you are not clear on how and why you will get back your money, why do you even do it then?
Becoming financially independent by 2025
For me, financial independence means having autonomy to do the things I like to do, feeling free to choose my purpose, and being confident that my family needs are fully covered.
My goal isn’t to buy expensive branded clothes or get the latest version of an iPhone. The things I want aren’t even so expensive, and nothing would make me happier than knowing that I can afford them in the future by 2025.
How do I manage my finances? When I started to record how much money I spent with a simple Google sheet five years ago, I tracked my monthly expenses and income, but soon it became too uncomfortable for me to deal with the household budget. So, my wife and I decided to switch to the Money Pro app. Simple and easy to use, there is a possibility to sync your data across multiple devices and see statistics – pretty basic functions that tons of other apps also have.
I am aiming for 10% of the annual profit from my investments and saving more than a half of my income gives a good forecast for achieving my set goals. There is the 4% rule that says that you need to multiply your annual expenses by 25 and you get the total minimum amount of money, which you need to invest to become truly financially independent.
I truly like my work and the people I work with. I hope l’m not alone in getting complete freedom, and together with other financially independent teammates, we could work on interesting projects, tech-related or not, I haven't decided yet.
My challenge is the following: when I am retired by 35, I want my savings to be enough to cover all my family expenses till the end of life. However, I am very well aware of the fact that higher expectations for quality of life could lead to higher costs, or would require additional sources of income.
When I am retired by 35, I want my savings to be enough to cover all my family expenses till the end of life.
And by the way, my daughter, who is now almost 4 years old, already has a separate account on Interactive Brokers that is made up of 70% of VTI (Vanguard Total Stock Market ETF), which is funded every year on her birthday. She is expected to have a pretty good amount of money to start with, when she is 16 years old.
When is the best time to start early retirement savings?
Yesterday, or the day before, would be much better than today. There is no good or bad time to start saving if you are interested in long-term investments, and not speculative deals.
As soon as you start getting your own income, it’s good to develop some habits that might not make you rich at the beginning but will definitely help you in the future:
- consider to have a financial cushion in the amount at least 6 to 12 months of your expenses;
- start with transferring 10% of your income to a separate account;
- increase your percentage of savings along with the increased income.
I am quite sure it’s not really about the amount of your income that allows you to do this. Of course, it would be more difficult if you can hardly cover your basic needs, but it is not the case in the tech industry – starting from a junior position you can save at least 10% of your income. When you are in a senior position, it should be easier to save 50%.
Another key advantage of starting investing as early as possible is that you have enough time to adjust your plans. I like the challenge of trying different tools to see how they work, and then evaluate if they match my portfolio or not. In some cases, it is easy to do for the low threshold for entry. So I take my chances on allocating some money that I am ready to lose.
If it is not possible, then I rely on the experience of other people – preferably the ones I know, but there are also many communities and networks of people who share similar interests. So it is important to have people around you who are interested in the same topics as you are. For this reason, we have a separate Forbes Club channel in our corporate MS Teams.
If something goes wrong
My main income source is still my salary paid by the company I have been working at for the last 11 years. I can lose my job for multiple reasons, including some unpredictable situations like health issues. For that reason, I bought insurance that covers critical illnesses or accidents.
Being loyal to a company and working there for a long period of time also means that the company is loyal to its employees. That’s why we have a unique benefits package that covers up to 90 days of sick leave that is kind of an additional financial cushion.
I can’t foresee any disasters in our industry for the next couple of years. And 2020 proved that those companies that have good IT systems are better prepared for pandemics and can survive or even grow much faster than before. So the demand for services my company is providing is growing every year.
It’s only a question of time when the taxation level will be aligned with other countries. It just gives a much better starting position now and it’s unlikely that it will ruin everything in the future.
What could impact my early retirement plans is growing inflation. On the other hand, it is a factor that could make you richer if you are not “sitting on cash”.
I think the concept of financial independence becomes more and more popular every year. Last month when I was doing a one-hour presentation on financial independence, around 150 participants out of 300 InterLogic employees showed up at the event. Furthermore, those who missed that event asked me to do this presentation again.
We have a unique situation here in Ukraine, especially in the tech sector. We are providing services on a global market that is growing faster than supply which means companies from the USA or EU are competing for engineers and are ready to pay high prices. At the same time, living costs and taxation levels are very low. It makes it possible to achieve financial independence much faster than in many other countries.
Most of the information I learned is from YouTube channels. There are really good ones like “Сімейний бюджет” and others alike. I’ve read only 2 books on finances and investments. One of them is “Rich Dad Poor Dad” by Robert Kiyosaki, a good book for inspiration. The second one is about more fundamental things and how stock markets work. It’s called “The Intelligent Investor” by Benjamin Graham.