How To Retire Early (and be in the top 1%)
Summary
- When I was already a millionaire, I was driving a six-thousand-dollar Prius, illustrating that high-earners don't always live extravagantly.
- It's common to see people outliving their means, but I've always lived on less than 5% of what I make, which initially was like living on $30,000 a year.
- You have to consider the relative cost of luxury items to your income; my Bentley costs less than a week's income, which is how I justified the expense.
- To be in the top 1% isn't about having extravagant things, but about financial assets. In the US, having 1 to 5 million dollars in assets puts you in this category.
- The top 1% income earners make over $400,000 a year, but many don't have equivalent assets due to overspending.
- Long-term thinking is crucial for financial success, as exemplified by Warren Buffett and Charlie Munger's lifestyles.
- To be very high net worth (top 0.3%), the goal is to accumulate between 5 and 30 million in assets, which is achievable by saving $15,000 a year for 30 years with a 9% return.
- Selling a product or service is typically necessary to achieve higher income levels, through which you can save significantly.
- Living on about $30,000 a year can set up a comfortable life without the need to spend more for happiness.
- The retirement calculator shows that spending less of your income is more impactful on retirement ability than earning more.
- By living on 5% of what we make, financial stability and the opportunity for early retirement or freedom to work by choice rather than necessity become more tangible.
- Achieving top 1% status is more about saving consistently, like $1,200 a month, and investing wisely over time.
- The simplicity of spending less than you make is often overlooked, but it's the key to reducing financial anxiety and achieving long-term wealth.
Video
How To Take Action
A good way of doing things is to start by living within your means, just like I did. Even when making good money, I kept my expenses low. You can live on 5% or even less of what you make, no matter how much that is. Here's what to do:
- Check how much you make. Can you live on $30,000 a year? Many can. It might not sound like much but it's usually enough for a comfortable life without extras that don't add much happiness.
- Save and invest wisely. If you put away even $1,200 a month consistently, and let it grow at 9%, you can build up to $5 million in about 30 years. That's the kind of long-term thinking that leads to success.
- Consider your spending. Do you really need that luxury item? Compare its cost to your income. For me, a Bentley was less than a week's worth of income. But remember, it's not stuff that makes you rich. It's the assets you build.
- Focus on your financial goals. Want to be in the top 1% or even 0.3%? Keep your eyes on your assets, not on showing off.
- Sell a product or service. You need to make money to save money. So find something valuable you can offer and use that income to grow your wealth.
- Use a retirement calculator. Understand that spending less has a greater impact on when you can retire than earning more. It’s simple, spend less than you earn to reduce stress and achieve long-term wealth.
Just be smart and consistent. Spending less is a powerful move. If you can save $15,000 a year, you’re on track to very high net worth. Remember, it's really about saving and investing more than trying to make a million dollars a year. Do these steps, keep it simple, and you'll see success.
Quotes by Alex Hormozi
"One of the important things to understand is the relative cost of anything that you have"
– Alex Hormozi
"Comfort's nice but there's not that much more enjoyment you get out of driving a Bentley versus a normal car"
– Alex Hormozi
"The easiest thing most people do is they just spend too much money"
– Alex Hormozi
"The percentage of your income that you spend is going to be the thing that dictates how quickly you can retire"
– Alex Hormozi
"Spend less than you make, the greater you can create that disparity the faster you can retire"
– Alex Hormozi
Full Transcript
what's going on everyone i've got a special presentation for you guys today this has been on my mind for um probably about half a week now um and it's gonna be about money all right everybody's favorite topic um and it's probably not gonna be what you think it's gonna be but it's gonna be really good promise so um one of the things that's top of mind is that i get a lot of conversations from entrepreneurs who are like i just want to be in the top one percent i wanna and the thing is is the people who are in the top one percent live a different way and they also don't live now the way they did to get here all right and so i'll tell you a quick story and then i'm going to show you what i mean with this beautiful pyramid and if you're listening then i'll try and explain it visually or audio wise so when i was um very early on in my career um or earlier than now right uh i was showing up to a mastermind event that i had it was the first mastermind event um i think we had 28 people who were showing up and all these people were paying 40 000 a year and i remember pulling up to our event it was in albuquerque uh new mexico and um they were walking into the hotel as i was pulling up right i was like nervous and excited and all that stuff and um one of the one of the girls monica guitar um uh was like as we're getting out of the car she was like i thought you guys were supposed to be rich and she literally said that and i still remember to this day because it was like such a moment for me um i don't even know if she remembers it but uh we were pulling up in a prius that had a crack across the windshield and a dent in the side door all right and this car was probably a six thousand dollar car tops right and the thing is is at that moment i was a millionaire like i had a million dollars in cash right um sitting in my bank account after taxes and yet i was driving a 6 000 car and so one of the things that i consistently see um is people outliving their means and this is that's not a new message but for some reason it still doesn't resonate with people and so i'm going to level up this conversation a little bit because you're like but wait alex i thought you now have a bentley which i totally regret by the way but i do have a bentley and we have a very nice home the thing is is a bentley for me relative to my income is less than one week's income for me income and so one of the important things to understand is the relative cost of any of anything that you have and so i have always used this back of napkin math to justify expenses all right and so as a result of that i always have lived on less than five percent once i started making money less than five percent of what i made which pretty much meant that until i was making a million dollars a year or more i lived on thirty thousand dollars a year right which is if you've heard my other story about once layla and i made our first hundred thousand dollars i told her this is awesome that means that we have three years of living if we make no more money all right because we knew that on on on 1500 a month we could live right decently comfortably and i'll tell you this comfort's nice but there's not that much more enjoyment you get out of like driving evently versus a normal car now i'm sure there's car people who are like whatever but i'll tell you that the incremental gain that i have in my life is not worth the money this is probably the last expensive car i'll ever have it's also the first really expensive car that uh we ever got but what i wanted to do though um and kind of shift the conversation is not just talk about you know making uh or spending a lot less than you make because i saw somebody recently who was one of our clients um they graduated from the program and then they went on to start an online business they were gym owner um and i saw the expenses that they were incurring and i was like man like that worries me you know what i mean it just it it worries me because i i see a lack of judgment um because you don't know how things are going to change i mean i think if the last year for anyone can say that things can change quickly and i want to have tons of dry powder tons of reserves to pull on if i need them and so for me i get more anxiety by having expenses and so for me to actually lower my anxieties i lower how much i spend and so if that's something that you can associate for yourself as in the less money i spend the more relaxed i am um then i would encourage you do it because for me it's been one of my kind of secret sauces of success is just like just don't spend a ton of money especially relative to what you make and so what i want to do for the rest of this is kind of first talk about what it looks like to get in the top one percent and then how to get there all right so right here you've got a pyramid and if you're listening um then you can listen along but there's four layers to this pyramid all right and this is kind of the top one percent pyramid the bottom layer of this is people who have these are considered high net worth individuals all right that means you have one to five million dollars in assets all right now this may surprise you but uh the people at this level and i've got my notes here so i'm going along with this um in the united states it's 1 in 69. so 1 in 69 people is has between one and five million dollars so being over a million is not even top one percent anymore um i mean it sort of is but like it technically it's a little like if you actually had one million dollars you wouldn't be in the one percent um but i find that but that's in assets not income right that's in assets not income you don't need to make a million dollars a year to be in the top one percent right and what's crazy to me is that the top one percent income is 400 000 a year but the top one percent in assets is only a million or a million and a half bucks how nuts is that it means people spend all their money that's what that means so if you have a top one percent income you should be way above the top one percent in assets but it doesn't work that way because people always want to show off and people can't think long term and the only thing that i've been continually reading about because i've been really pouring a lot into really reading a lot about monger and um and uh buffett so warren buffett and charlie munger who are founders and one of berkshire hathaway is how they live and how they think in terms of long term and so i'm going to transition to talking about how to get there but i'm going to finish this little chart for you so this is the top 1.5 percent roughly of the u.s is one to five million in assets and that's one in 69 so if you i for me i like the one in personally it makes it more real for me so 1 in 69 people all right now in the us the next level is very high net worth so you go high net worth to very high net worth individual for this it's 0.3 percent all right of people that's crazy now here's what it is in math that's one in 338. so one in 338 people is worth between five and thirty million dollars that's what they have in investable assets five and thirty million dollars i'm i'm purposely putting this out there to hopefully counter the instagram culture of flexing in front of a lamborghini or bentley right whatever because most people are broke like most people are poor and i i think that i'm gonna i'm gonna i'm gonna lay out a a a plan for you that's very simple to get you above this to really just be in the top one percent and the thing is is like i said the top one percent income earners or earn over four hundred and twenty thousand four hundred forty thousand a year depending on where you're looking that's per year so for you to get over five million like you just need to live on a lot less than you make if you're in the top one percent income earners you should be in this five to thirty million dollars within not a ton of time right and then the the level above that is ultra high net worth individuals which is uh one in 13 83 and that's uh what is that that's point zero seven percent all right point zero seven percent all right and then finally i'll just finish this little chart out um billionaires is uh one in 468 000 all right and uh and the percentage there is point zero zero zero four zeros three zeros three zeros two percent all right now the reason that uh the jump between the the third stage and the fourth stage is so large is that the range is between 30 and a billion so everyone that's between got between 30 and a billion is in the next level and then billionaire is the fourth category so these are kind of like the the four layers above the one percent the very first layer kind of gets you into the top one percent more or less right and then um above that you have the varying categories the thing is is that in order for you to get to above five million dollars so not even top one percent but top point three percent all right one in three hundred and thirty eight so you walk into the 238 people you're probably the richest person in the room all right for you to do that you got to save like 15 grand a year for 30 years that's it and that's assuming just nine percent returns which is just the stock market i just put in the s p 500 and don't do anything with it right that's not doing crypto that's not that's not that's not learning how to like it's literally just save a you know 1200 a month and and put it into the s p and do it every month that's it if you make four hundred thousand dollars a year so you're making thirty five thousand dollars a month right if you live on five you can put ten thousand dollars and you'll be at the you'll be at the top end of this right but everyone just spends so much money and so i i i just when i see this it's both incredibly encouraging to me and also incredibly saddening it's encouraging to me because i feel like genuinely everyone can get to the top one percent which doesn't make math mathematical sense but it makes it makes realistic sense and you feel like but alex how do i how do i save twelve hundred dollars a month right so it's two things it's income and time right net income being like minus your expenses so it means it's make more money spend less money the easiest thing most people do is they just spend too much money right and i know that sometimes you can like it's sometimes apparent depending if you like follow my instagram or whatever but like layla and i think i was asking for her to give me the numbers from last year but we live on less than five percent of what we make all right and you're like well sure that's because you make a lot yeah but i lived on that when i made nothing right and so i think most people like you should live on 30 grand 40 grand a year and the thing is is that you already know in your heart that spent making that spending more of the money is not going to make you happier i'll tell you right now it's not and if the point of spending money is to make you happier i'm telling you it's not sure like i have this studio i can justify it as a business expense um but i did this mostly because i enjoy it and to me from from a percentage of income it's negligible right and so i got this fancy setup only after i had already crossed three of these levels right i'm saying this because it just it frustrates me because i really believe anyone can do it i really do you should have to live on a lot less than you make and so anyways to finish this out right what do you do most times you're going to have to sell something right either you're selling someone else's product or you're selling your own product either way i say product i mean product service whatever right but either one of those categories and if you make a hundred thousand dollars a year a hundred thousand dollars a year and you live on 30 you can do this not only can you get into this quote bottom level the top one percent but you can get the top point three percent right now if part of you is like well you know that then what's what's the point of living it really depends on on what you value if like and this is kind of backwards because it's like the type of person who wants to have more money wants to spend the money they have then i can understand it but then at that point just don't yearn for more does that make sense so like don't be dissatisfied that you haven't achieved your goal for me what i'm looking at is like how can i get into this category by the time i die and use that to impact humanity like in a way that's that's meaningful that's what i'm that's what i'm trying to do right and so anyways i told you the prius story to illustrate a point which was i was a millionaire and living on less than three thousand dollars a month right um i owned my car our rent was 1200 bucks and layla and i lived on we bought food at the grocery store you know what i mean like we went out once a week like it wasn't like you can do that and live a normal life like a comfortable life and that was when we were making a lot of money and that's because i always have a fear or had a fear that i would i was like what happens if we stop making money i don't i just don't want to lose everything and so i think if you can be satisfied and decrease your anxiety or make the amount that you spend decrease your anxiety you will be happier so i'm going to leave you with this one piece as a final note on this which is the simple retirement calculator all right world's simplest retirement calculator so if you live let's say let's say that you are currently uh 30 years old all right so you're currently 30. and um you want to retire all right so let's say you want to retire soon let's say you want to retire by the time you're 40. all right crazy you're going to try and retire entirely by your 40. okay cool i dig it so if you're a retired boyfriend i'm saying retired but realistically you're going to work because you like working but let's just say that you won't you don't want to have to work you want to work on the stuff you like working on after you're 40. cool no problem the percentage of your income that you spend is going to be the thing that dictates how quickly you can retire not how much you make so for example if you make 400 000 a year like i said right and you save 10 right versus making a hundred thousand dollars a year and you saving uh let's say eighty percent is what you save then what you're what you every year you're adding four years of retirement because it means that you're spending 20 and saving 80k whoo that's great that means for every year you're getting four years back which means if in 10 years at this point you'd have 40 more years right once you hit 40 because you had 10 years of stockpiling for each year right you'd have 40 years of living now mind you that's assuming it's your current level and that the money that you now have saved up at this point because you should have 800 000 right and that's assuming that none of the money you had made any money so it'd probably be closer to like 1.2 right million by the end of that decade that's really conservative still maybe even 2 million right at that point that this money isn't even making you money that's just literally assuming a straight decrease in how much you spend right that every year would just go down which isn't even realistic right but if you did that then you'd get there and that's on 100 a year right that's it on the flip side if you're at this 10 guy then every year he gets one tenth of a year right because he's saving 40 it costs him 400 to do a year which means that this guy is never really going to be able to retire right and he's always going to be stressed or she's always going to be stressed and so i say that only to illustrate one point which is you have to spend less than you make it's sometimes a simple that people don't want to do and it means that you can either have your ego and how you look to everyone or you can have your ego based on the freedom that you feel and i know that the vast majority of people will never do that i get messages every day from people who are like you know they've been trying for 10 years to make a million dollars a year rather than maybe trying to make a hundred thousand dollars first right and the thing is is to be in this top one percent you don't need to make a million dollars a year not even close you're not even close you don't even need to make close to a million dollars here to be in the top one percent right if you just add a little bit of time you can get in the top one percent just being reasonable right you can get in the top point three percent by also being you know unreasonable because compared to everyone else right just because the thing is is most people are insane in terms of their irrational with their behavior and their expenditures they are stressed about the amount of money they spend and yet they are the they're in complete control of how much they spend just spend less and you'll be less stressed so anyways that is my money money message for everyone today um we still continue to less on live on you know five percent maybe ten percent of what we make i don't think we live on ten percent we live on five percent of what we make and the thing is is like at that point if you live on if you live in five percent or ten percent of what you make then it means that literally one year if you as like walk walk with me for a second if you live on ten percent of what you make and your money grows at ten percent then in one year you could retire assuming you have a stable income from the the savings that you had on the other 90 right figuratively one year 15 months whatever but you get the idea right does that make sense for everybody like if you live on 10 percent of what you make or you live like you're like but man that's like poverty levels it's like yes but it's poverty levels in your mind based on your perception not based on reality of the fact that you're going to be stockpiling money that will continue to feed you forever along you want right and so the the moral of the story is spend less than you make the the greater you can create that disparity the faster you can retire or get to a point where you choose to work on the things that only you want to work on right and getting into the top one percent is literally a matter of saving a thousand fifteen hundred bucks a month and putting in the s p 500 that's about it it's all there i mean like that's that's it that's all there is to it and the thing is is it's so simple no one will do it that's okay but you're a smart cookie and you're gonna do it because um you think that simple things are usually the keys to the universe which i agree with you so keep being awesome lots of love and i'll catch you guys on the flip side bye
