If you are like most people, the idea of working for decades on end does not appeal to you. If it were up to you, your life would focus less on work and would instead offer more opportunities for fun, be it traveling the world, seeing your loved ones more often, taking long walks in the evenings, or reading more the books on your shelf. But the truth is that whether you own a business or are on the career track, your life and, therefore, retirement are up to you. And you can go into early retirement by just taking a few practical steps.
In the modern age, retirement is not an age. Instead, it is the stage where you have achieved enough financial independence to comfortably support your lifestyle without going to work. But how do you get there?
There are two main things you need to map out from the start, as follows:
Suppose you retire at 40. You would need to carve out a budget that would last you the next five to six decades. But how can you tell how much money is necessary to maintain your lifestyle when you are no longer working?
Knowing what you need now and comparing it to your future helps you understand whether you will need to up your budget to manage your expenses.
Your job or business may not be enough to support the expenses you will incur in the future. So, how can you get more money?
Think outside the box to figure out how you will close the gap between what you have and what you need.
You may think that the best way to make more money is to put your savings in almost every investment vehicle that comes your way. However, that's not the best strategy. Before investing in anything, analyze your risk appetite, weigh the possible risks, and ensure you are not taking on more risks than you can handle.
Do you have a pension? How about an IRA? There are many ways to ensure you have money coming in long after you have left work. If you are employed, look at options that allow your employer to also contribute to the scheme, as this will help you save money. If you own a business, look into individual pension plans that offer rates that can keep up with the inflation.
As you step into a life where you will rely on savings and investments, you do not want to have debt following you around. Work to pay off as much of your debt as you can, focusing on the high-interest loans the most. The less you owe, the more money you will have to direct to your savings and investments.
One of the main reasons most people work till their old age is that they spend almost all the money they earn on daily expenses. If you can limit your spending on your wants (e.g., vacations) and needs (e.g., groceries), you will have more money for savings. It also helps to assess where your money goes, making cuts where possible focusing more on savings and investments.
As you age, your healthcare needs will increase, as will the costs. You do not want to have bad health insurance when you need it the most. Now is the time to set up a health savings account and partner with a reputable health insurance provider that can offer you excellent services well into your retirement.
Is early retirement for you? Why, yes! It may look like something that's only accessible to the wealthy. But if you plan your finances right, you, too, can retire early and start living your life the way you want to, ungoverned by your work or business. All it takes is some good planning, the willingness to sacrifice instant gratification for future benefits, and the patience to stick to this path.
