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The goal is not to get rich quick.

In the short-term, the aim is to be a little bit better off next year than you were last year. This is wealth preservation.

Any post-tax return above inflation is good. The next target is beating the the risk-free rate (the return on 10-year government bonds).

In the long-term, the aim is to amass enough money to enter retirement, at whatever age that might be.

This requires the provision of permanent income for life, which in turn means building up a pot of money of a specific size.

Most people call this reaching financial independence (FI). Some people aim to be FI at 65, others at 50.

There’s even a “retire early” branch of FI (called FIRE) whose members live frugally and save a large proportion of their income in order to hit FI in their 40s or even 30s.

Category: Lessons and Rules

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