Financially Independent Retire Early With Options (FIRE) - 47
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I was a weird kid growing up. I know that's a really hard, weird way to start this episode. But, yeah. I was a weird kid growing up. I was obsessed with money. It's weird. Sometimes it's the thing that we don't have that we strive for, strive for, strive for. I think that was part of it. I'm not going to go into my whole story of when I was little and that we didn't have any money or anything. But I think that was the major motivation for it. But when I was little and anybody asked me, "Hey, Allen. What do you want to be when you grow up?" The answer was, "I want to be a billionaire." That's actually what I told people. It wasn't a doctor, a lawyer, an engineer, an astronaut, any of that stuff. I wanted to be a billionaire for real, because I thought that if I had a lot of money, then I would have freedom.
But then, as I grew older, I got into my teens, I started reading books, like, "Okay. How do I get rich? How do I get rich? What do I got to do?" One of the earliest books I read was, "How I Made $2,000,000 in the Stock Market" by Nicholas Darvis, and that book really introduced me to the stock market. I'd never heard of it before, but I was like, "Wow. This guy, this was a long time ago, and he was traveling around the world, and he was making money from the stock market. Wow. I want to do that." So I read that book. I read "Think and Grow Rich". I read "Rich Dad, Poor Dad". I read "How to be Rich" by J. Paul Getty. I kept reading books and books and books. I realized that you don't have to be a billionaire. Being a billionaire is probably a lot of hard work.
I toned down my goal, and then my new goal is that I wanted to retire early. I didn't really care about the retirement part. But the idea was to have enough money coming in without me having to work for it in order to pay all my expense. I got that a lot. I think I got most of that idea from "Rich Dad, Poor Dad", where it was like, "Are you successful? How do you know that you're going to be successful? Or if you cannot work? Let's say you get hurt, and you cannot work for three months, six months. What's going to happen to you?" Because I think that definition of being rich really hit me, really stuck with me that, you cannot work, and you have enough money coming in that will pay all your bills, and you're going to be okay, and you can live the life that you're used to without having to work. That was like, "Oh, man. This is awesome. This is my goal." Since then, that has been the goal.
In fact, my wife and I were just talking about this the other night, that thanks to options, we both could stop working today, if we wanted to. She has her own business that she owns with a partner. She goes there a couple days a week. She could stop going. She don't have to go anymore. I could shut down or sell Option Nunez, and that would be it. Wouldn't have an office to go to anymore. Just stay home, handle the kids, drop them off, pick them up, do the normal momma, daddy day thing, and we wouldn't have to work. We do have other investments that are doing well. But the money that comes in from the trading covers our expenses. That goal of being able to retire early has been met. On a side note, that led to a little bit of a mid-life crisis for me where I was like, "What's up? What's next?" Kind of thing, but that's a different story.
We have other investments that are doing well, as well. Those are making money and coming in. We also have investments that are doing poorly. Just this year, I've lost already about $80000 in bad investments, $25000 each in two different cryptocurrency investments, and $30000 on a real estate deal that we just closed this week. I was lucky to get out of that, even with a loss of $30000. But because my monthly expense are covered, I'm not mad about the losses. I wasn't. Yeah, they suck. That's a lot of freaking money, right? But they didn't send me into a panic like, "Oh, my God. Oh, my God. How could I be so stupid?" I didn't get into that because I'm okay financially. I knew that I was rolling the dice, especially with the crypto ones. Those are like, "Okay. You put in $25000 in. If it does well, it's going to turn into $250000. If not, you're going to lose it all," and that's what happened, pretty much. There's still a chance we can get some money back, but most likely those are going to be gone. I knew the risk on the real estate one, as well. That one was unexpected. I didn't think I was going to lose money, but we did. That's okay. Maybe we'll make it up on the next one if we do another one.
I'm not saying all this to brag, but I want to prove to you that, if you work at it, if you learn, if you practice trading seriously, that you, too, can get there. You can start with nothing and get there. At my lowest point, I was down over $100000 in debt. Credit cards and loans and personal loans and student loans and all that stuff. I crawled out of it. You can get there. You can do it. You can do the same thing if you set your mind to it, especially if you don't have three kids like I do, three little kids all under the age of 10. Those little boogers are expensive. Geez. When you look at it, I'm not special. I'm not a genius. I don't have any gifts that you don't have. I dropped out of college, and it eventually took me about 10 years to finally get my Bachelor's Degree. It took a long, long time. If I can do this, seriously, I know you can.
The title of this episode is "FIRE", which is Financially Independent Retire Early. That is a new movement. It's not really new, but it's a movement that has become popular lately, and you can read articles about it, and people are writing books about it, and blogs and there are even podcasts about it and everything. It's basically retire early, become financially independent. They call it FIRE. Cool. Okay. This is especially big amongst millennials, because I guess they don't want to work for the man, and they don't want to work till they're 65 years old. But it's really cute, though, how millennials think that they create things that have been around for generations. It's like the desire to retire early. It's like, "Yeah, this FIRE thing. It's cute that you gave a name to it, but you guys didn't create this. People have been wanting to do this since the start of time, really."
Anyway, according to the tenants of FIRE, you have to do three things. You have to earn as much money as you can at work. You do have to work. You have to earn as much money as you can. And, you have to get a side hustle. A side hustle, just another name that they gave to a second job. Whether you're working online, for yourself, as a freelancer or you actually have a second job, or you do something else like trading options, you have to have a side hustle to make as much money as you can.
The second thing you have to do is you have to save as much money as you can. And they do this by basically living as paupers. That's what they tell you to do. Live like a poor person, like a homeless person. You don't need a car. You can ride the bus to work and take a bike, because that's healthy for you. Eat less food. Don't eat so much. Don't go out to the movies. Watch Netflix at home, all these kinds of things, where you're trying to save as much money as you can. And then, with that money that you save, you invest it in something like index funds. You put it away, let other people manage it, and that's the cycle. Earn as much as you can, save as much as you can, invest it.
Now, if you follow that formula, it works. There are people in their 30s that have enough money saved that they can live off the interest off of their investments. Their investments or whatever they invested in is making money, and they can live off of that interest, which is awesome. They don't have to work. Most of them don't have kids. Even if they did, they still have to live frugally, of course. Because even in your 30s, even if you're making $100000 a year as a job, you're still not going to be able to save that much that you're going to be earning a lot of income, or a lot of interest from your savings, from your investments, to live middle to upper class. These folks, they have retired. They're not working, but they are living low to middle class, somewhere around there. That's cool if you like that sort of thing. I don't. I think you can have your cake and eat it, too. I want you to retire early and still be rich. That is doable, if you take control of your money.
Now, I agree with the "make as much money as you can" part. I agree with that part. I agree with the "save as much as you can" part. Now, I don't think you should live like a pauper. I think you should enjoy your life, even now, while you're working, and you're saving. I love driving. I love my car. I'm never going to give that up to save a couple hundred bucks in gas and insurance a month. But if that's something that you want to do and that will get you to your goal faster, then do it.
But your side hustle should be to learn to grow the savings you have as much as possible, instead of losing control of your money inside of a mutual fund. Does that make sense? Your side hustle, you have to make as much money as you can. You go to your job, you get your income, you save your money. What do you do with that money? Well, you can give it to somebody, index fund, mutual fund, and let them do it for you, and hopefully the market goes up or maybe it will go down and then pay fees for all that information and whatever. Or, you spend your time, and you learn how to do it for yourself, because there are people out there that will charge you to manage your money that are not going to do anything that you cannot do for yourself. You can actually do it much, much better.
That's what we're all about. That's what we're trying to teach you. That's the point of this podcast, to help you to learn how to do that. Take advantage of your own future, instead of giving it to somebody else, and then you can fire yourself much faster, years and years sooner. I did some calculations to prove my point, here. Over time, the stock market has averaged about eight percent a year, eight percent yearly return. That's pretty good. But when you sell options like we do, we have the ability to make 10% a month. A month, not a year. Stock market, 8% a year, options 10% a month. Hmm. Which one is bigger? I don't know. You could sell options one month out of the year, make 10%, and then take the rest of the year off if you wanted to. But these trades and these option selling I'm talking about is very high probability trades that can make you at least 10% a month. Ten percent, that's my goal. That's what I try to make every month. But I know traders that do a lot better than that every month. It's definitely possible.
Now, look. I know right now that might seem like a bit of a stretch to you, maybe if you're not making 10%, or you don't understand the strategies. Ten percent is a lot. That's 120% a year. That is fabulous. If you asked me, "Oh, nobody every does that, Alan." Uh, yeah. I do. I've done it before. It's not impossible. But let's be a lot more conservative. Even though 10% is possible, let's just aim for 5% a month. That's 60% a year. Still, very, very impressive. There are guys on Wall Street that will chop off their right arm if they could make 60% in a year. That's really good. If you start with a $10000 account ... Let's say you start off with $10000 in your trading account and you're making 5% a month, in 5 years, you would have over $186000. Five years from now, $10000 to 186000. That's really, really good. What could that kind of money do for you? What would your life look like? Would you have a new car? Or maybe a new bike for you FIRE people? A new house? a new plane?
I know, okay, okay. Maybe 5% seems a little high right now for you, maybe because you're new to options and maybe you've tried to make it work before, and it didn't work for some reason. All right. Let's say you screw it up, and you don't make 5%. You only make 3% a month. Let's cut down our expectations. Do you think you could do that? If 5% is possible, and the odds are in your favor, do you think you could make 36% a year? That's in addition to whatever you're making on your stocks right now. You take that, and you add it to the 36%. That would be really good, right? Would you be happy with just 36% a year? That's really good. I'd be happy with that, because in 5 years, if you have a $10000 account, your account goes from $10000 to $59000 in 5 years. That's almost six times what you started with. We're still talking about life changing money. It would be awesome, right?
But I get it. Okay. Maybe 3% is a little high. How about if you totally, totally screw it up and you don't even get 3% a month. What if you only get 2% a month? That is 60% less than our goal amount. But that's still 24% a year. How would your account do, then? Making 2% a month? That would triple your account in five years. Your $10000 account in 5 years goes to $30000. And then, in another 5 years, from $30000, it goes to $98000, because it compounds. Every year, it's just going to compound and compound and compound. Remember, we're only starting with a $10000 account, here. $98000 in 10 years, that's fire your boss money, right there. That is actually 2% a month is more than what Warren Buffet has made. He's averaged 22% over his life. If you can do 24%, it's possible you can do better than Warren Buffet. Now, he started with millions of dollars that other people gave him. I'm not going to compare that and say you can be the second richest man in the world, or whatever. I'm not going to say that. But you can do better, have better returns, than he does.
These are all hypotheticals. Now, let's look at a real example. Let's figure this out. For most people, a really good average income would be about $100000 a year. Is that fair to say, you think? Would you be okay with that, if we used $100000 as an example? Let's say we want to make that. We want to make $100000 a year income. That is $8334 a month, $100000 divided by 12 months. I'm going to leave taxes out of this, otherwise it's just going to get too complicated. But first, what we need to do is we need to figure out how much money our account would have to be worth, because we're trying to make $8334 a month. How much money would we need if we were making 2% a month, to be able to make that? That number is $416700. If you have an account that size, $416700, and you make 2% a month, you would be making $8334 a month. You would be making $100000 a year. We need an account of that size, $416000. But we don't have that right now. Most of us don't. You don't have it. Okay. I get it. No problem.
Right now, let's say we only have $50000 in our account. I think that's more normal. I think most of us have at least that, or maybe more, maybe a little bit less. It's okay. But let's just say we have $50000, and you can make 2% a month. If you have $50000, and you make 2% a month, question. How long do you think it will take you to get your account to be able to give us an income of $100000 a year? You start with $50000, you make 2% a month. How long will it take to get to $416000? You think it will take 20 years? You think it will take 30 years, 40 years, maybe? Well, I did the math on investor.gov. It's a website. They got all these nice financial calculators that you can play with. It would take just nine years. Imagine that. If you're 50 years old right now, you could be making $100000 a year in income before you hit 60. When you actually do retire, you'll still be getting your Social Security, your pension and whatever else that you have in your investments. Sounds like a really sweet retirement to me. Am I right?
If you have $50000 right now, and you only make 2% a month without any stock appreciation, in 9 years you would have a 6 figure income from just the income from your option trades. Oh, and on top of that, you'd be working about a couple hours a week. I think that's the kicker. Oh, yeah. I forgot about that. We're going to be working hard? Uh, no. Now, for some of you, you might not have the $50000 right now, and that's okay. This is an example. You could start with a lot less. We have traders in our community that are starting with less than $5000. When you have a smaller account, it just takes longer, but you can still do it. Trades are the same, strategies are the same. Everything is the same. But the important thing is that you need to start now. Can you imagine it? No more credit card debt. No more worries about college costs. No more worries about not having enough money for emergencies. That's pretty cool, right? I think so. It is. It's an amazing way to live. You could lose $80000 a year and not even be mad about it.
My wife got mad, to be honest. She did. I told her it was going to be a slam dunk. I was like, "Yeah, yeah. It's going to work. It's going to work," and then we lost the money and she got mad. I didn't get mad, but she did. All right. But what if you are super, super new to investing, and you're just awful at trading. You're the worst. And you don't even get 2% a month. What if you only get 1% a month? That's 12% a year. How many of you guys would be happy with 12% a year. I would. I think so. That would mean that your $10000 account, in 5 years, increases to $18000, and that's without any stock appreciation. That's just the income from your option trades. Even if you're only making 12% a year, 1% a month, it's still significant money. It's still better than what you can do in the stock market, because you put your money in the stock market ... Stock market is getting 8% average, sometimes 7. Some people say seven, some people say eight. I just went eight. But if you calculate all the fees, all the commissions you pay, you're going to be looking somewhere around 4%, 4 and a half percent is what most people get out of the stock market.
If you can make 12% on your own, and you compound that money month, after month, after month, after month, because when you look at the stock market and when you put your money in an index fund or a mutual fund or whatever, that money doesn't compound every month. It compounds every year. When we're doing our option trades, these are monthly trades, sometimes less than a month. If you have $1000 in your account, or let's say $10000, to keep it simple. Let's say $10000, and you make 10% in a month, well now you have $11000. The next month, you're not playing with $10000 anymore. You're now playing with $11000. It compounds every single month, and that's why it can grow so fast, much faster than in the stock market if you put it in an index fund. Does that make sense? Good. Because that's what I want for you.
If you want to retire early, if you want to be financially independent, you don't want to live like a pauper, like a poor person, like a homeless person, then the best thing for you to do is follow the plan that I just laid out. Number one, try to make as much money from your job as you can. Number two, you've got to have options as your side hustle. You've got to be selling options. You've got to be trading options, selling them, not buying them. Number three, save as much money as you can. If you don't need to go to that five star restaurant, don't. If you don't need to go to the movies, get Netflix. It's fine. You'll watch the same movies later on. Once in a while, you want to splurge, do it. Enjoy your life. Don't live like a pauper, but don't live above your means, either. Save as much money as you can. Spend your time that you have, your free time, your side hustle time, learning how to trade, selling options, practicing, practicing, practicing, getting better, asking questions, getting education. Find other traders that you can talk to and ask questions from, learn from, model what works, because I've done it. Others have done it. We have hundreds of people in our community that have done it and are doing it right now. We've interviewed people on the podcast that are doing it right now.
It's not something that I'm making up. There are people who are doing it. There is a model. There is something that you could follow, a path that you could follow. Just follow it. Put your nose down, do it. The biggest problem I see, a lot of people when they start trading options, they're like, "Oh, man. I want to trade options. I want to make a lot of money. But I don't want to do it this way. I don't want to do it that way. I want to do it my own way. What about if I do this? What about if I do ..." And they don't follow the plan. They don't follow the path. They don't follow what's already been laid out. I said it a hundred times, keep it simple. Keep it simple. Just do what works. Follow the plan that's already been laid out that people have already been doing it. There's that poem, right? Follow the path that no one has gone on or ... Man, I don't know what it is. But in this situation, you don't want to go on the path that nobody's gone on. You don't want to make your own path. There is already a path on the road. You just want to follow the path, follow the road that's already been laid out for you.
And then, when you're rich, when you're monthly income, your passive income that you're not working for or you're just trading for, that income is greater than your expenses, yes. Then you can take risks. Then you can go and take a cryptocurrency flyer, or you can go invest in a real estate fixer flip like I did and lose your shirt. All right? And then you won't worry about it, because next month, the mortgage is still going to get paid. The light bill is still going to get paid. Your Tesla bill is still going to get paid, all right?
That's the way it works. Follow the path. And remember, trade with the odds in your favor.
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