How to retire early
As long as you have the money to support yourself, you can retire whenever you like! That’s the catch, isn’t it?
But it actually runs much deeper than this.
First, you need to determine what you want to do in retirement. Knowing the answer to this very pertinent question will give you the answer to the next one. How much do you need to retire?
Now that you know what you want to do, you can start putting together your retirement plan. If you don’t want to work until 65, waiting for your pension, I hear you. But unless you can tell me exactly how you are planning to cover yourself in those years, it will only remain a dream.
If nothing comes to mind, let me throw some suggestions out there for you. Remember I am not a financial advisor here and whatever you take away from this today is at your own discretion.
1. If you are employed make sure to take advantage of a tax-deferred account to save on the amount of tax you pay each year.
2. Know your numbers. This is your first step to going on this adventure. Knowing all your numbers will allow you to see where you are at right now and what things you could work on. If you decided to work with an advisor you will already be prepared!
3. Consider investment fees. Look to see where you can get the most favorable management fees if you plan on staying in the same investment for a few decades. A 2% management fee on investment or a 0.2% fee is a huge difference. In the long run that could be a new boat, people!
4. Consider your spending and create a budget. Yes, you know this but it will keep you on track to achieving your financial goals. Get rid of unnecessary things, invest or pay off your debt.
5. Focus on paying off all debt immediately and don’t accumulate any more bad debt. It’s common sense but it’s surprising what happens when mid-life hits and you start to stop giving a crap about things. Don’t let this happen to you. Keep your focus on the future while still figuring out a way to enjoy today. Keep reading.
6. You need some extra income. Perhaps it’s learning how to receive dividends on your stocks. Or maybe you start teaching guitar on the side or editing content for someone. With a bit of cleverness, you may even be able to make up your entire pension plan instead of grinding to 65!There are so many different ways to earn extra income – it just takes thinking about it and one small action step to get started. (read passive income blog)
7. Double your savings plan asap. If you are putting aside $200 a month right now - sorry my friend, you are not on track to retire early. We all here the golden rule of saving 10% of your income and investing it - I’m talking more than 10% here people. It’s time to get serious.
8. Get selfish. Tell your kids to make money and support themselves. Even the 10 year olds - lol. Ok, i’m kind of kidding here but seriously, don’t just give your money away. If they have brains and you want then to do well in the world, teach them smart money habits so they can do well in this world without you. It’s good for them.
Also, make sure your aging parents are financially secure. Have difficult conversations about the future to make sure they will be OK financially. Many of us do not consider this, but it could be very significant to you if they are not able to finance their lives.
9. Join the F.I.R.E movement – meaning become Financially Independent and Retire Early. Today you will find hundreds of blog posts on how to be a part of this movement.
Join a group you resonate with and start learning and bouncing ideas off each other. You will not only gain inspiration from a group like this, but you will also stay motivated during your journey to financial independence.
10. Get really clear on what's happening with your investments right now. No more head in the sand. In order to retire early you need to understand if those investments are enough to get you there or if you are going to need to do something else. Consider your fees, what rates you are getting at the moment and what other options could work for you. Reach out to your advisor to re-assess and if you don’t have an advisor, make a plan to look for one.
If you don’t feel like DIY-ing this whole topic yourself it may still be worth finding an independent financial advisor to help you reach your goals. A great advisor will ask you when you would like to retire and set you up for success.
11. Increase your income! Yes, that’s right. If you feel it’s time for a raise go ahead and ask for one. (refer to how to get a raise post). If there are no options for you to get a raise, it may be time to evaluate your career options. The next point is very critical after you land that raise.
12. Live below your means. Let’s say you land that raise, get a great bonus, or are making some great passive income by making YouTube videos with your dog. You don’t rush out and upgrade your car or house or buy a second home etc. You buckle in and think about those desired retirement years when you can live the life you want. You pay off all your debts, save and invest, and work on your strategy to retire early.
13. Downsize. Let’s say you are living large right now. What about switching it all up for a year or five and really crushing your debts and becoming hyper-focused on your retirement? Look at how quickly one year passes by – like the blink of an eye. Consider the impact you can make on your finances with some sort of downsizing action.
14. Have a backup plan in case things don’t work out. Of course, you don’t want to hear this but let’s say hypothetically all your plans flop. What will you do then? Go back to work? Move in with your kids? It’s important to think about this. Not only will this keep you determined to reach your goals, it will also give you a chance to get creative with some alternative options. For example, teaching english in Portugal perhaps?
15. Make sure you have your healthcare sorted. This could potentially be a money pit. Figure out how you will keep yourself covered in order to live your best life.
16. Stop renovating things. Seriously. Your kitchen will come back in style in 20 years. Brass is back and that’s just insane. Pay off debt and focus on making that money work for your future rather than having it sitting in a pretty sky-grey cabinet color.
Listen, I like a pleasant home and a comfortable environment too. A few affordable things can be done to hold you over until you get your dream retirement home that’s paid off and fully affordable.
If you are dedicated and committed to your goal of retiring early, there is a whole world out there ready to support you and wants you to to help you succeed - just look for it. Get listening to podcasts that inspire, pick up a book and be confident in your decision to make this about you taking control of your money and your life.
Feel free to add any other suggestions in the comments below!