Ordinary people with a plan and self sacrifice can successfully build a retirement fund of their own

The example being shown here is of a person who graduated college with an Engineering degree but with no savings. Using a combination of steady savings and steady stock market investing, that person was able to to grow a retirement fund to be worth $1,000,000 by the age of 43.

In this story there are four stages.

• Stage 1 – 23 to 25 years old – going from $0 to $20,000 – Our young engineer having studied such popular and useful books as The Richest Man in Babylon, Pay yourself first by George Clasen and Rich Dad Poor Dad by Robert Kiyosaki, knew the key to building a retirement fund that he could use to retire early was to set aside 10% of his salary each month and then to invest that money in the stock market. “To convert savings into assets so that your money works for you.” per Robert Kiyosaki. He invested in established growth companies during those years and by the age of 25 had amassed $20,000 in a retirement fund.
• Stage 2 – 25 to 29 years old – going from $20,000 to $100,000 – Our young engineer makes some progress in their engineering career and gets steady raises. The 10% of salary deduction from payroll invested in the stock market is maintained. The Rich Dad Poor Dad guidance of “A house is a liability, you want to acquire assets” is followed. The engineer is tempted but decides not to buy a house during this time. Warren Buffett’s words of wisdom “Look for obvious singles – don’t swing for home runs” is taken to heart. He avoids risky Flyers and startups even thou people he knows in his peer group brag they are making big easy money on these risky investments. He takes Peter Lynch’s advice to heart “Go for a business that any idiot can run because sooner or later, any idiot is probably going to run it!” Risky investments were avoided and the original game plan is maintained. Buying established growth stocks every month from the payroll deduction.
• Stage 3 – 29 to 43 years old- going from S100K to $1 Million – Our now middle aged engineer started getting promotions, changed companies for better pay but continued to deduct 10% from payroll each month and invest in the stock market. He got married, had a kid or two and finally bought the house since he now had a family to support. During this time, the market had several big sell-offs. Down 50% at some point, below his original $100K starting point. He did not waver but keep plugging away at 10% each payroll, reinvesting dividends. He took the advice of Ben Graham to heart “If you are shopping for common stocks, choose them the way you would buy groceries, not the way you would buy perfume”. Meaning stocks on sale is a good thing, not a bad thing. Some months he made more in the stock market then he earned in his job and other months we lost more money in the stock market then he made in his job. He did not waver. He paid no attention to the doom and gloom talking heads on CNBC like a Jim Cramer or other headline grabbers like him.
• Stage 4 – Achieved his goal of over $1 Million in his retirement account at age 43. . Now his life is full of options. Retire early, travel, you name it. He and his family can do what they want with the rest of their life.

Conclusion: Our digilent Engineer showed that investing can be very straight forward and simple. It takes sacrifice, first and foremost. You must forgo spending today in order to benefit down the road. It takes an investing plan that you must stick to. In his case, he set aside 10% of his pay each month and he bought established growth stocks and held them indefinately. One could do the same thing with broad based ETF’s and Mutual Funds such as SPY and VTI. He never pulled any money out of the retirement fund to pay daily expenses or to get that shiny new house or car. Those items were delayed and then funded with non-retirement funds, always.

All data used in this article come from the following video from the YouTube channel The Swedish Investor