As this post goes live, I am on my way to attend my brother’s graduation from physical therapy school.  So in honor of my baby bro this graduation season, I thought I would share something for all you bright-eyed, bushy-tailed college grads out there as you set out to change the world.

College graduation is a time for new beginnings, new goals.  For those of you who have been through it, you know what I mean.  Time to find that new job or new car, to buy a house, to get married and start a family, or to climb the corporate ladder and become the best in your field.  So many goals!  Let me throw another goal in the mix that you may not have considered yet.

Aim to retire in 10 years.

“Whoa!  I just graduated!  Retirement is for old people.  Why think about retirement now?”  Well, let me define what I mean by “retire.”  Early retirement, also sometimes called pretirement, financial freedom, or financial independence, is simply having enough passive income to cover your living expenses.  It means not having to be a “wage slave”—working out of necessity to cover the bills.  It does NOT mean sitting at home and doing nothing.

Imagine the freedom you can have when you don’t “have to work” because you “have to pay the bills”.  Want to work part-time? No problem!  Need to stay home to take care of the kids?  Absolutely!  Decided that you don’t like your boss?  You can become your own boss!  The best part is you can even spend your time doing big things to benefit the world without requiring a paycheck.

“Yeah, yeah,” you say.  “That’s nice, but that’s not really possible, is it?”

Would You Like a Half Mil?

Suppose as a young professional, you make $50,000. (I know this number is arbitrary, but let’s just go with it.)  You choose to live on $20,000 a year as a Crumb Saver.  You invest the rest, $30,000 a year at a rate of 8%.  How much will you have after 10 years?  $500,000!  Half a million dollars!  This doesn’t even include the pay raises or bonuses that you’re sure to get along the way.

Then it gets really exciting.  Now that you have $500,000 invested, suppose you draw out 4% each year to live on, while leaving the rest to continue growing at 8%.  (This helps account for inflation.)  Guess how much that 4% equals?  Yup, you guessed it.  $20,000!  And this number will increase each year, keeping pace with inflation.  So you work, save, and invest like mad for 10 years, and then that money will work for you so you won’t NEED to work for the  Assuming you retire at 35 and live to 85, that 10 years of work will pay for 50 years of “retirement”.  You are in essence trading in 10 years of hard work for 50+ years of financial freedom.  In case you think $20,000 is impossible to live on, check out our annual spending for a family of two.

How many of you new grads wish that you would be given half a million dollars?  Stop.  You don’t need to answer.  I already know what you’re going to say.  Here’s the thing:  You will be.  The question is, are you willing to do what it takes to keep it from slipping through your fingers?

But You’ve Got Cancer

Some of you may be thinking, “This is impossible!  I’ve got student loans to pay off!”  Yes, student loans will slow down this process, but say it takes you double the time.  You can still retire in 20 years with plenty of pep left in your step to change the world!


Ahem.  Pardon me for raising my voice, but I needed to make a point.  Rather than the compounding interest working for you as in our early retirement example, it will be working against you.  With a student loan, every single dollar you spend in your life is taxed at the interest rate of your loan.  Ever tried walking up an escalator in reverse?  Or running with a parachute on your back?  Yeah, you get the point.

Oh yeah, and federal student loans can rarely be discharged even if you go through bankruptcy.  You basically get out of it either by paying it off or dying.  Umm…I think I know which path I’d rather take!

Since you’re a new grad and haven’t had the time to accumulate a huge home mortgage, car loan, or credit card balance (tell me you haven’t done any of those things, have you?!), NOW is the time to take aggressive action to cut out this financial cancer!  You don’t make minimum payments on student loans (or any consumer debt, for that matter), just like you don’t simply drink more water when you you’ve got cancer.  Get rid of it as quickly as possible. Pay it off by making as large of payments as you can humanly muster.*  (Take this to heart especially if you’re still single, because dating, marriage, and kids have a curious way of siphoning cash away from debt-reduction.)

If you are graduating debt-free, congratulations, and realize that you are in a very blessed minority.  You are already halfway to retirement; don’t waste this golden opportunity!

Change the World

I won’t say that this path will be necessarily easy.  However, I can say for sure that the earlier you start, the easier it will be.  Just because all of your friends have student loans and are buying fancy new cars and spending money like it’s going out of style doesn’t mean you have to.  Rather live with the knowledge that you’ll be financially healthy and free in a few years while those friends will still be grinding away under their metastatic financial tumor.  Realize that the decisions you make now will compound to massively affect you in the future–for good or for ill.

I also need to reemphasize that the goal should not be simply to attain a life of luxury, but rather a life of maximum usefulness.  Financial freedom should allow you to give more of yourself to benefit the world around you, by removing the common financial constraints that hampers most of us.  In short, you do this so you can be in a position to really change the world!  After all, isn’t that why you went to school in the first place?

*If you need some inspiration, Sam from Frugaling, is a PhD student who works full-time, runs a blog, and paid off $25,000 of student loans in 12 months!