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Cashing in on the American Dream: How to Retire at 35 Hardcover – July 1, 1988
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Top Customer Reviews
In a conversational style, Terhorst explains how he realized his job was sapping the life out of him, and how he used his skills as an accountant to devise a plan that would enable him to retire at 39 years of age. Unfortunately, the specific financial advice he gives (invest in high-yield certificates of deposit) is no longer possible. But number-crunching is not the most important message that Terhorst has.
Cashing in on the American Dream advocates a no-nonsense approach to determining just what you want in life. Do you want to be free of working for others? Then it might mean giving up your car and dinners out. But it doesn't have to mean giving up what you really love (or need). Terhorst and his wife, Vicki, have been retired almost twenty years now and have spent much of it traveling the world. They have health insurance abroad, because it's cheaper than U.S. insurance, and better.
The Terhorsts have their own website and I like to check in on them once or twice a year. The fact that they have made their plan work all these years is more important than any advice they have. Cashing in on The American Dream is an inspiring book. If they could do it, why can't you?
It may not be for everybody, but it appeals to many.
This book is a little dated when it refers to 8% CDs, but the concept is one which is timeless. The author, Paul Terhorst was featured in "Money" magazine several times and has a web site [...] The author retired from his CPA job at KPMG to live the life of world travel and financial freedom. When he retired in 1984 he was making in excess of $125,000 a year. The concept works best where you have a high priced personal residence in a hot real estate market. The premise is that you sell your high priced house and your status car. Then you take the proceeds and invest it in a SAFE, CONSERVATIVE investment living off the interest and never touch the principle. You move to a lower priced area, either in the US or outside. A friend of mine spends much of his time in Costa Rica and tells me that one can still live there for $10,000 to $20,000 a year. I have been to Lake Chapala in Mexico where many Americans live a comfortable low cost life in a moderate temperate climate. A major consideration is health insurance and health care. Some people will be able to get continued coverage from their former employers or the employer of their spouse. For many people this does not work.
One of the basic concepts of the book is that you have money to begin with. If you have no money this process just won't work. But the author does have a chapter entitled "It takes less money than you think". People living in coastal/metropolitan US cities are used to high priced houses costing $500,000 and up. And this is not just Bill Gates type mansions. Regular middle class houses can cost that much in parts of the US. But at the exact same time there are places where houses are extraordinary inexpensive. In rural areas outside the commuting area of the big cities there are houses that sell for $25,000.
Just think about how much less you could live on if you didn't have a huge mortgage payment and a huge car payment. Terhorst talks about either not having a car or having a "station" car. That would be the kind of car that you could leave parked at the train station and have no worries about dents. Scratches, and scraps. There are plenty of older, some with low mileage cars around for low prices. Something like a Chevy Station wagon from 15 years ago or a Chrysler Cordoba. The purpose of the these cars is not to imress but just your basic cheap transportation. And if the repair bill gets too high you sell the car and buy another cheap car to replace it.
According to the author he has moved out of CDs when the interest rates fell and has a more traditional portfolio of low costs index funds. While living in Argentina him and his wife had an HMO, but currently are self insured and avail themselves of cheaper medical care outside of the US. And while there are places where $50 a day doesn't cut anymore like Paris, the author is still able to live with that self imposed budget in many places.
The author writes about a life of traveling to different places around the world but always living on $50 a day. That figure may need to be adjusted for inflation. This book provides one blueprint for independence that though dated should be thought provoking in the reader and your dreams and creative juices flowing. By looking at the author's website you can get a current update on their travels. In January 2003 they were in Bangkok, photos on website. This is a favorite book fo mine along with "Your Money or Your Like" by Joe Dominquez and Vicki Robin.
The main premise of this book is that by tapping into equity you may already have (like your house), and keeping your expenses at a reasonable level, you may find that you are closer to retirement than you think.
A key component of Mr. Terhorst's philosophy is appropriately entitled "Don't work for your Assets". When you consider the amount of money that many of us spend on property taxes, car payments, car insurance, expensive toys, swimming pools, etc., who are we really working for? Are we working for ourselves or simply supporting our assets? His solution to this situation is to calculate how much those assets would be worth if they were converted to cash. When he went through the exercise for himself, he realized he had enough money to retire at age 35.
Many years after retiring and writing this book, Mr. Terhorst and his wife are still retired, doing what they want each day, instead of slaving away from 9 to 5 for someone else, which is a testament to the effectiveness of his early retirement philosophy.
An excellent book. Highly recommended.
John L. White, author "I'm in Debt, Over 40, With No Retirement Savings, HELP!"