Today is a first for The Retirement Manifesto. While I’m traveling in Vancouver, a reader has approached me with a request to publish an article of his. So, here is the first ever reader post, focused on steps you can take to retire early. If any of you readers are interested in posting an article on my site, please contact me. I encourage you to give it a try – you may like it!
How Can You Retire Early – By Symon Roger
“Early Retirement – Stop working and start living”
For most Americans, the thought of enjoying time with family while they’re still young and energetic is appealing. “Forget retirement”, most people think, believing they may be fortunate to be able to retire at all. Many fear facing a future where they’ll have no choice but to work throughout their life.
Do you belong to this class of people? Do you believe that you have to work well into your sixties? If yes, then it’s time to change your thought. Believe it or not, you can retire early, as demonstrated by some aggressive folks who have been able to retire in their thirties.
Surprised? Wondering whether or not you should believe me? Well, in that case, let me clear your confusion.
Six Tips To Help You Retire Early
1. Work and live on little: If you want to retire and live on your terms, then put all your energy to work now. Work hard to accelerate your income. Discuss with your spouse, ideally she’ll also be able to work and alllow you, as a couple, to save a decent amount. Remember, you have to save a lot more than others since you’re planning to leave the job early.
Tricks to live on little and save:
- Avoid the urge to explore restaurants, eat at home instead.
- Delete shopping apps and other temptations to spend.
- Shop only when it is necessary.
- Commute by bike instead of car.
- Do household work together, don’t hire it out.
- If single, get a roomate (or three) to help reduce your rent expense.
2. Invest to generate passive income: Use a slice of your savings to make smart investments. Dedicate time to learn about investments, develop your strategy, and manage your portfolio. Your goal will be to splurge less, invest more, and generate enough income to live life without depending on a paycheck.
3. Calculate how much you need to retire: Usually, retirement savings accounts give around 4% return in your lifetime. The possibility of running out of nest egg is a major concern of retirees. To develop your own target, calculate your retirement portfolio target. A general guideline is to use a total which is 25 times your yearly spending. This is the amount you need to target in order to achieve an early retirement.
4. Change your financial goals: Once you’ve calculated the amount you need to retire early, change your financial goals immediately. Sit with your spouse, and decide your new financial mantra. For instance, it could be “$500,000 in investments and a debt-free house” for the next few years. It would help you generate enough money to live comfortably without doing any work.
5. Avoid pre-retirement blunders: This can destroy all the possibilities of early retirement. In fact, pre-retirement blunders can break, demolish and vanish your nest-egg within a few months. Here are the few pre-retirement blunders you must avoid at any cost.
6. Have a set of financial values: It is important to have a set of financial values. Otherwise, it will be difficult to reduce your expenditures, which in turn means that you won’t be able to save at the level required to achieve an early retirement. Whenever you go to a departmental store to buy something, just think once – “Do I need this item? Should I spend this amount of money on this item?” If the answer is ‘yes’, then go ahead and buy the product. If you feel that the product is not worth the money, then don’t spend the money. Be conscious of your spending.
Do you need a written plan for early retirement?
A written plan is necessary to determine your path toward early retirement. Create a written plan to have all the answers related to early retirement – why, when and how. Decide when you want to retire, and then compute the amount that is 25 times your yearly spending. Think about the pension plans and Social Security benefits too. Once you have the data on paper, you can proceed with moving forward with the actions required to achieve an early retirement.
Finally, two factors ultimately decide if you can retire early, and these are (a) the amount you earn (b) your savings rate. The second factor depends entirely on your spending habits. The day you learn to control your spending habits, the dark clouds will go away, and your financial picture will become crystal clear.
Author – Symon Roger