From two leaders of the FIRE (Financial Independence, Retire Early) movement, a bold, contrarian guide to retiring at any age, with a reproducible formula to financial independence
A bull***t-free guide to growing your wealth, retiring early, and living life on your own terms
Kristy Shen retired with a million dollars at the age of thirty-one, and she did it without hitting a home run on the stock market, starting the next Snapchat in her garage, or investing in hot real estate. Learn how to cut down on spending without decreasing your quality of life, build a million-dollar portfolio, fortify your investments to survive bear markets and black-swan events, and use the 4 percent rule and the Yield Shieldso you can quit the rat race forever. Not everyone can become an entrepreneur or a real estate baron; the rest of us need Shen's mathematically proven approach to retire decades before sixty-five.
|Publisher:||Penguin Publishing Group|
|Product dimensions:||5.40(w) x 8.30(h) x 0.80(d)|
About the Author
Kristy Shen and Bryce Leung are world travelling early retirees. Their story has been featured in media outlets all over the world, including the New York Times, CBC, CNBC, Women's Health Magazine Australia, Germany's Handelsblatt, GQ Russia, and the UK's Independent. They spend their time helping people with their finances and realizing their travel dreams on www.millennial-revolution.com.
Read an Excerpt
CHAPTER ONE: BLOOD MONEY
One of my fondest childhood memories is digging with my friends in a medical waste heap in rural China. As we sorted through the piles of latex gloves, soiled gowns, and used syringes, a tiny voice in the back of my five- year- old head suggested that maybe this wasn’t such a great idea. But that was overridden by a much louder, more hopeful voice saying, “What treasures will I find today?”
Now, don’t get me wrong. I didn’t live inside the medical waste heap— I’m not a troll. But I did enjoy it because unlike in a real store, if I saw something I wanted, I could actually get it. Otherwise, a typical experience went like this:
“Mom,” I would say, my face pressed up against a glass case, “I know we’re poor and we don’t have any money. But one day, when I grow up, and I make my own money, then can I have that doll?”
And somehow the answer was still no.
So that’s why my friends and I were behind the hospital that day. If I couldn’t buy a toy, I reasoned, maybe I could make one.
I did find something, believe it or not, in a seemingly infinite supply of discarded rubber bands. We tied the loops together to form a chain and then made the chain into a Chinese jump rope. The best part was that every time our rope broke I could repair it by just swapping out the wonky rubber band.
These days, this would be considered grounds for child services to get involved, but back then, this was just what life was like. We were dirt- poor. And when you’re dirt- poor, your choice isn’t between Barbie and My Little Pony. Your choice is between food, heat, and medicine, in that order. Toys never even entered the picture.
According to the US Census Bureau, in 1987, the national average wage in the United States was $18,426.51 per year per person.1 In China, it was 1,459 CNY, or $327, per year per person.2 To put that in perspective, earning enough to buy a Nintendo Entertainment System (Deluxe Set) at its then– retail price of $179 would have taken the average American worker less than a week. But for the average Chinese worker? The better part of a year.
Also, $327 per year was the earnings of the average individual, which included everyone in major urban centers. We lived in Taiping, a rural village with a population of just three thousand, so salaries were even lower— around two- thirds less.3 My entire family income, at one point, was 600 CNY, or $161, per year, or 44 American cents per day. My dad, my mom, and I had to live on less than 1 percent of an average American’s daily salary.
I’m not telling you all this to crap on my childhood or make you feel bad for me. In fact, I’m pretty grateful that I grew up in this way, because I ended up developing something called the Scarcity Mind- set, which played a big part in making me who I am today.
WHAT IS THE SCARCITY MIND- SET?
To understand the Scarcity Mind- set, let’s go back in time.
The year was 1945. On January 27, the Soviet army entered Auschwitz and liberated seven thousand men, women, and children from the largest death camp the Nazis had built. Naturally, the soldiers’ first instinct was to open up their army rations and say, “Take it! Take it all!”
Turns out that was the wrong thing to do. The prisoners gorged on the food and ended up becoming horrendously sick, some even dying. They didn’t realize it at the time, but giving a starving person too much food causes their blood sugar to spike, which leads to a dangerous drop in electrolyte levels, a medical condition that would later be known as refeeding syndrome.
Near the end of the war, scientists at the University of Minnesota ran a study to figure out the safest way to treat starving people.4 Thirty- six men agreed to be put into a dorm, starved (sufficiently starved but not dying- starved), and monitored.
Sitting became excruciating. Pillows had to be placed between their bottoms and the chairs because they had lost so much fat it hurt. They swelled up like blowfish. Extra fluid started collecting under their skin— a condition called edema— and caused a semipermanent dimple whenever anything pressed into their bodies. They were so weak they couldn’t even take a shower; they just didn’t have the energy.
But the most shocking change was to their brains. Constantly being deprived of food does strange things to your psyche. Food became their only preoccupation. Hated Brussels sprouts? Didn’t matter. Any food placed in front of these subjects was devoured, the plate licked clean. Some subjects brought cookbooks and menus from local restaurants and read them over and over again. They pored over newspapers, memorizing and comparing prices for tomatoes and eggs. Even watching a movie became a peculiar experience. The volunteers wouldn’t remember the plot or the characters but recalled in vivid detail any time the characters ate something.
In a recent study that took place in a lab, subjects were separated into those who had eaten lunch and those who hadn’t. When seated in front of a screen flashing words like “TAKE,” “RAKE,” and “CAKE” for one- thirtieth of a second, those who hadn’t eaten correctly identified the food words far more often than the control group did.
When you don’t have enough of something, it becomes the most important thing in your life. Everything else is secondary. The experiment changed the subjects not only physically, but mentally as well.
This is the Scarcity Mind- set.
When someone’s starving, their brain ignores almost everything— except that one thing it doesn’t have.
MY SCARCITY MIND- SET
In 1958, Communist Party leader Chairman Mao began a campaign known as the Great Leap Forward. It was an attempt to rapidly modernize China’s economy from agrarian to industrialized in order to compete with the West. Only, it was crafted by someone with the economics knowledge of a toddler. Farming villages were given a quota of steel to produce, despite the fact that the average villager had zero knowledge of how to, you know, produce steel. Villagers abandoned their farming efforts and built backyard furnaces. They melted their pots and pans to meet the quotas.
This quickly caused what became known as the Great Chinese Famine, which ravaged the countryside for three years. Meanwhile, the government exported grain to the West, Cuba, and Africa, despite severe domestic food shortages, to advertise how well Mao’s plan was working. People were dropping like flies, while foreign aid was refused. Private ownership of land was forbidden, and growing your own crops was labeled “counterrevolutionary” and punishable by death— assuming, of course, you weren’t already dead from starvation.
After every blade of grass, every leaf, and even insects had been picked clean, people started eating clay. The clay was called “Guan Yin” after the goddess of mercy— a fairylike goddess in white robes worshipped for her compassion and kindness. Since this type of clay was white, people thought the goddess of mercy had blessed it to save them. The clay of course had the opposite effect and many people died painfully from bowel blockage. Even so, people still ate it, just to have some relief from their hunger pains.
On his walk to school, my dad would regularly hear a thud and look over to see a schoolmate slumped into a heap. He summarizes this time by saying, “My only wish was to be full.”
During the worst month of the famine, my dad’s best friend, Wenxiang, saved his life by giving him a bite of a half- rotten sweet potato he found in a farmer’s field. It had been missed when the government confiscated the harvest, and if he’d been caught, he would’ve been executed. To this day, sweet potato is one of my father’s favorite foods.
Wenxiang died, like so many of my dad’s friends, of starvation, just a few months before the famine finally ended in 1962.
Since then, my dad has gotten his wish of knowing what it’s like to be full. But food is still his obsession. I wasn’t ever allowed to waste it. Every piece of an animal had to be eaten, from head to tail, the marrow sucked clean from the bones. That’s why he found it so strange that chickens in Western supermarkets were packaged as “thigh,” “breast,” or “wings.” Didn’t these chickens have heads? Necks? Feet? Thinking of those unwanted parts tossed away made his heart ache.
My dad’s story taught me how scarcity takes over your mind. I didn’t live through a famine, so my life was already a major step up from his. Even though I didn’t own a pair of underwear or socks that wasn’t patched and repatched by my mom until there were more patches than sock, even though I got bullied for my thrift- store clothes and DIY haircuts, and even though I became exceptionally good at pretending to be sick to avoid field trips that my parents couldn’t afford, I never forgot how lucky I was.
But growing up in poverty created a Scarcity Mind- set in me, too; I was obsessive about money.
In 1988, my dad got a chance to immigrate to Canada for his PhD, leaving me and my mom back in China. On my seventh birthday, he sent me a musical birthday card. Dad told me he had bought it in a dollar store. I did the calculation quickly. One Canadian dollar was around three CNY at the time, which meant that this one card could have fed my family for almost two days! It was by far the most precious thing I had ever owned. So of course, I went around the neighborhood, playing it over and over and smacking whoever’s dirty hands dared to get near it. I wrapped it in a cloth and kept it under my shirt as if it were a baby bird that needed constant tending.
Several months later, its tiny battery ran out and it died a glorified death. But I’ll never forget the time I was the proud owner of the most expensive and special card in the whole world. Two years later, after Mom and I had immigrated to join my dad in Canada, he decided to take me to the toy store for the first time in my life. He picked up a stuffed bear from the shelf. I looked at the price tag and gasped. Five dollars was enough to feed our cousins back in China for more than a week! I returned that overpriced bear to its shelf and pulled him over to the bin with the giant orange sign that said “SALE: $0.50.” Afterward, I made him send the remaining $4.50 to our cousins, and I felt amazing every time I thought about how they would be fed for a week because of my sacrifice.
The Scarcity Mind- set does have its downsides, though. When I was nine, we lived in a tiny one- bedroom apartment near Dad’s university. The entire place was furnished with mismatched, half- broken furniture my parents salvaged from the curb or picked out from the dumpster. But compared to the concrete box where we had lived in China, with no heating, damp floors, and a bathroom that was just a hole in the ground, it was a palace.
One day I came home from school to find that I had lost my key. After turning my schoolbag upside down and digging through all my books, gym clothes, and pencil case, I still couldn’t find it. A cold feeling of dread filled my chest. I delayed the inevitable as long as possible, but after dinner I had to fess up.
For the $30 that was required to replace the lock, I had to pay the price. And by that, I mean my mother beat me. Not only did I gain a crazy- high pain threshold that day (I’m basically Wolverine), I also confirmed my suspicion that when you’re poor, money is the most important thing in the world, because money is survival. You don’t make careless mistakes because if you do, people go hungry, or even die.
Look: I’m not telling you these stories because I want you to weep over my messed‑up childhood or applaud how far I’ve come. I want to show that you don’t need to grow up privileged to become a millionaire. As a child, I couldn’t even fathom what a millionaire was. Was the cupboard full or was it empty? That’s as much as I knew about money.
My family started off in the bottom 1 percent, which rewired my brain to make it hyper- focused on what we lacked. That Scarcity Mind- set made me prioritize financial security above everything else— and it is precisely that Scarcity Mind- set that got me to where I am today, in the top 1 percent. These days, instead of digging through trash, I travel the world as a thirty- five- year- old retiree. Rather than handicapping me, the Scarcity Mind- set taught me the three lessons that would eventually turn me into a millionaire:
Money is the most important thing in the world.
Money is worth sacrificing for.
Money is even worth bleeding for.
Table of Contents
Foreword JL Collins vii
Part 1 Poverty
1 Blood Money 3
2 Peach Syrup, Cardboard Boxes, and a Can of Coke 10
3 Be Educated or Die 21
4 Don't Follow Your Passion (Yet) 26
5 IOU = I Own You 34
6 No One's Coming to Save You 46
Part 2 The Middle Class
7 Confessions of a Former Purse Junkie 55
8 The Dope on Dopamine 62
9 Your House Is Not an Investment 78
10 The Real Bank Robbers 89
11 How to Survive a Stock Market Crash 100
12 Taxes Are for Poor People 121
13 Never Pay Taxes Again 136
14 The Magical Number That Saved Me 156
Part 3 Becoming Wealthy
15 The Cash Cushion and the Yield Shield 173
16 Getting Paid to Travel 188
17 Buckets and Backups 203
18 Inflation, Insurance, and Health Care: Scary Things That Aren't That Scary 219
19 What About Kids? 232
20 The Dark Side of Early Retirement 247
21 You Don't Need a Million to Break Free 256
22 Go Your Own Way 268
Appendix A (Chapter 14) 277
Appendix B (Chapter 14) 279
Appendix C (Chapter 15) 298
Appendix D (Chapter 21) 303