Netflix recently released a new film called Get Smart with Money – really worth checking out.
This film helps 4 people, each with their own financial problems, achieve their financial goals.
Having watched them transform their lives, there are 4 lessons we can learn from this film:
Don’t get into Debt – do not use credit cards or loans to buy stuff if you cannot afford them.
Earn more Money – start a side hustle; it takes time to build but grows in income over time.
Invest your Money – so your money can continue to grow if you no longer can/want to work.
Early Retirement – by applying these lessons, you may not have to work until you are 65+.
In this post, I talk why you need to get out of debt and why you need to start a side hustle.
I also talk about the benefits of investing early and how you can aim for early retirement.
Finally, I summarise these key points and where you can go to find out more information.
Lesson 1: Don’t get into Debt
In the film, Ariana is in serious debt – $45,000 in consumer debt and $100,000 in student loans.
Student loans are somewhat understandable, but the rest of the debt is emotional spending!
The problem with all this debt is that it compounds; the more you leave it, the more it grows.
The message is simple: don’t be like Ariana. If you’re in debt, you need to get out. Here’s how:
- Pay off the minimum amount of debt each month, and over pay on your debt every month.
- Pay off the debt with the highest interest first – you need to kill these blood suckers ASAP.
- Repeat these steps until all your debt is paid off. Be realistic, this process may take some time.
- Most importantly, don’t get into debt again! Don’t use credit if you don’t have enough money.
By getting out of debt, you free your money for more important tasks: saving and investing.
You save up money for future large purchases and invest your money so that it compounds.
Lesson 2: Make More Money
In the film, Lindsey works in hospitality – living from payslip to payslip with no money left over.
She wants to get out of this cycle, so that she doesn’t have to keep working just to survive.
The fast and easy solution is cut spending – by spending less, you get to have money left over.
However, this is a limit to how frugal you can be – you need a minimum amount to live on.
The slow yet best option is to make more money – this is no limit to how much you can make.
The secret is to start a business, not get a job. A job is tied to your time but a business is not.
A job is a quick way of making money, which is necessary to survive yet is limited due to time.
A business takes longer to make money yet is limitless – its about how much people you help.
That’s why you need to have both: a job so that you can pay bills while working on a business.
You’ll reach a point where your business is making enough money for you to leave your job.
Lesson 3: Invest your Money
In the film, Teez makes good money – after all, he is an American football player for the NFL.
However, he is one injury away from getting kicked out of the NFL – and into unemployment.
He has all this money sitting in the bank, doing nothing other than loose value due to inflation.
What can he do with this money so that it continues to grow even if he can’t play anymore?
This is where investing comes in: a method of growing your money independent of your work.
The investing strategy he decides to go for is a stock market strategy known as Index Investing.
This type of investing has low fees and historically generates the best returns in the long term.
For example, if he invested £60,000 in the S&P500 in 2017, it would now be worth $112,000.
By investing your money, you money can continue to grow without you having to do anything.
Even if you can no longer work like Teez, you will have a way of making money in the future.
Lesson 4: Early Retirement
In the film, John and Kim also make very good money – due to Kim’s growing online business.
She is expected to make $300,000 this year – that is more than enough to retire early quickly.
The problem is they also spend a lot of money – $12,000 in monthly expenses or $150k a year.
It comes back to the 1st rule of early retirement: it’s not about how much you make, but save.
This couple has the opposite problem to Lindsey – they make good money through business.
So what they need to do is cut back on their expenses dramatically – and then invest the rest.
If they keep making £300,000/year but spend just £60,000/year they could invest £240k/year.
That means that they could actually retire early in just 4 to 5 years by following the 4% Rule.
However, if they don’t cut back on their expenses, it might take them over 15 years to retire.
That’s why you need to not just make good money, you need to keep and invest most of it!
How to Get Smart with Money
So how can we learn from these people, take these lessons, and apply them to our own lives:
- Get out of Debt: Pay off all major debt you have first to free your money/income for investing.
- Start Investing: Start to invest with savings and income you have, and watch it grow slowly.
- Make more Money: Start to make more money outside of your job, and invest that money.
- Keep Expenses Low: There is no point making more money if you’re just going to spend more.
- Retire Early: By following these steps, you can be sure you’re on your way to early retirement!
To find out more on the steps to early retirement, check out the book: Quit like a Millionaire.
The authors discuss their journey to early retirement and what early retirement is really like.
Are you on the path to early retirement? How is it going? Please share in the comments below.
If you have any future blog article suggestions, please let me know in the comments below!
