The BEST Way to Retire Early | w/ Kevin o'Leary

so um i want to go back for a moment

to somebody just starting out uh let's

say they've gone

20 30 000 do they try to buy

a one bedroom house or condo or do they

go

all in on index funds or ishares

or you know do they just yolo it all

into tesla

what's what's your take there well i

have a rule that my mother taught me

decades ago that served me well in all

the volatility i experienced as an

investor from my early

20s on a simple rule let's talk about

the market first never let one stock

become more than five percent of your

portfolio

and never let a sector of which there

are 11 sectors

in the american economy like you know

real estate's now a sector

technology uh health care they're all

sectors never let the sector become more

than 20

of the portfolio and that gives you

diversification which is very important

to

to be able to survive volatility in a

market when you make a big bet and you

let tesla become 80

of your net worth and should should it

correct

um a lot of people learned that the hard

way in the dot com era

you know they had stocks like pets.com

that went to zero that kind of thing

but if you have diversification um you

don't have that problem because the

likelihood that everything goes to zero

is lower much lower

regarding um housing you have to

understand something about housing

you really can't buy a house for twenty

five thousand dollars so what it means

is that you're going to take on debt

and so mortgages are most people's

largest

um obligation in their lives and their

largest asset is their home

there are periods in time when prices of

housing correct and you're under water

in other words you don't have any equity

anymore because you owe

more than the house is worth and so

sometimes the best thing to do is to say

i'm going to

be a renter until i can actually afford

a mortgage

even if the market corrects and that may

be a better discipline

because the truth about retirement if

you have the average salary in america

56

000 it might be better to simply put

aside a hundred dollars a week

put it into an etf an index etf the

market has given

over a long over 100 period 100 year

period

somewhere between six and a half and

nine percent return on average long term

some years are down some years are up

there is volatility

but the point is at the end of the day

that has ended up being the way you

retire with over a million and a half

dollars but you have to have the

discipline

of putting aside a hundred dollars a

week and there's so many different apps

you can use to do this now it's not like

it's hard to do

what's hard to do is change your

behavior because most people spend

everything they make and more

and then they end up in debt but it

would really be

you got to remember something when you

put 100 into an index fund that's in

your name

that money's for you it's not for

anybody else you're building your own

future which i think is a good way to

look at it yeah well

a big thing that we hear a lot about

right now is this uh having an emergency

fund having that six-month emergency

fund

something that i found is a lot of

people they'll save up that cash they'll

build up that six-month emergency fund

but before you know it vacation time

comes up and oh we'll just

borrow from the emergency fund and we'll

just repay it because

i mean whatever like why not you know

and then what happens is

nobody ends up ever investing uh what's

i mean is a hundred bucks a week gonna

do it it's the minimum

if you can put 400 bucks aside which is

actually doable with your average salary

of 56 000

it's the minimum obviously you should do

more a simple way to look at it is take

10

of your paycheck and put that away and

never hit it do not

touch it obviously i understand medical

emergencies and everything else but the

truth is

when you take money and burn it on a

vacation or buy some useless piece of

crap you're

never going to use which many people are

guilty of including me

you've actually you've killed off your

future that's money's not working for

you anymore

so do you really need another pair of

jeans another pair of shoes just look at

your closet of all the crap you don't

wear

that's all the money you wasted the

truth is most people wear

you know maybe a dozen different things

they have even though they have

30 of something um that's what my mother

taught me she said

buy few things but buy really good

things when you buy them

that last and i that's the philosophy i

have in everything from watches to

clothing

wow wow now i want to ask you a specific

question

on real estate there uh one of the ways

i started well

the way i started was i bought a house

putting three uh

three and a half percent down as a

fixer-upper uh my girlfriend at the time

she put

uh half of the down payment in uh and i

put down half so we each put down about

uh

six seven thousand dollars plus some

closing costs and that uh and

one of the things that we found that was

so beautiful about that was

we were now able to buy a 300 000

asset that needed some repairs so i

could put my own sweat equity into it

we were able to control a 300 000 asset

having a net worth of

9 000 each uh and and so we were able to

do that with a monthly payment of about

two thousand bucks a month

and the beauty about that was worst case

scenario if we needed to

we could move and rent it out for that

you know even putting money aside for

repairs and that

uh yeah or worst case scenario we

thought hey if we can't afford the

payment we'll rent out rooms

isn't that potentially a way that people

can start house hacking

or renting out rooms or buy a duplex

rent out another room

just to be able to leverage up their

wealth maybe quicker

than they could otherwise yes it is and

i did the same thing

with the exception that i don't think

it's a good idea with a random

girlfriend

you should enter into a financial

relationship called marriage if you're

going to do that because that asset

you become very very valuable becomes

part of the couple's

financial stability every time

i've heard of people that have and i've

got plenty of examples of this

you fall in love it's euphoric you buy a

house together you're not married

then poo poo happens 50 of unions fall

apart for a lot of different reasons but

then you've got this horrific litigation

trying to solve for liquidity

you know liquefying the house or one

side buys the other half

from the other it's a mess and so i

always say to people look

i did it on my own i borrowed ten

thousand dollars and i was able to buy a

house and i

rented every room out i lived in the

basement um

but i over time built a lot of equity up

in that just as you said

but i didn't do it with my girlfriend at

the time because i don't even know where

she is anymore

i did it myself so unless you're getting

married

uh i wouldn't do it that way okay

well well fair correction there i will

say

knock on wood but lord and i uh we we

are happily married now and have two

kids

maybe we were the other fifty percent

but i you know that's that's a great

it's a great story but i mean if others

listening

i i i really you know i wrote a book

called men women and money exactly about

this and i'm very proud it became a

bestseller almost overnight but it deals

with topics like this

and it and it really talks about the

reality of

you know where money fits in love and

it you know there's a reason that after

seven years fifty percent of unions

uh fall apart it has nothing to do with

infidelity most marriages can survive

that

but it has a lot to do with financial

pressure and that's why

when i did a lot of research with

divorce lawyers and they said it's

always the money

it's always the money one couple

outspends the other and drags everybody

into debt

and finally that just takes over the

only reason they're together is fighting

about

debt terrible yeah that is terrible

that's unfortunate

i'm about to say and it'll be a little

embarrassing saying it to you but

i'll say it and i don't recommend this

so i want to be very clear about this

uh uh of so about half of my net worth

is in real estate about half is in

stocks

uh so uh the portfolio because there's

there's debt obviously against the real

estate

and a little bit against stocks as well

which i know you're not a big fan of

uh but uh of my of the half that's in

stocks

about uh 48 is tesla is that

really bad yeah yeah it is

that's really bad so i get roasted by

kevin o'leary i had to do it

that is that is a very bad idea um

because you saw

a drawdown of 25 or 23 and it's come

back a bit

you know your cost base is probably very

low on tesla

um you know so i would never ever let

that happen in my portfolio

ever so if anything if anything happens

to tesla you're going to really be

crying the blues

but you know but you thank goodness we

met you can fix this kevin

that's true

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