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17 Practical Money Skills that Will Set You Up for Early Retirement

17 Practical Money Skills that Will Set You Up for Early Retirement

One might get excited about the idea of an early retirement, but to actually make it happen requires careful financial planning and some practical money skills.

In this article, I will list down 17 practical money skills that will set you up on path for early retirement and financial independence.

1. Make a written plan

Making a plan only in mind is not the best way to go about retirement planning.

Whether you believe it or not, you cannot simply tread on an unplanned road and expect to reach the right destination. It would just be akin to playing your luck rather than “planning”.

You must remember that financial success is a choice. Each financial decision that you make every single day will determine closer or farther you are going from your goal.

Invest time in writing down your financial goals so that they can materialize over time.

Remember that you are not simply aiming to jot down some words of motivation through this plan. Instead, the aim is to define each and every aspect of your financial goals and give them a shape with exact written words and figures. This includes defining the timeline and quantum of money management to meet the financial goals.

2. Ask yourself: Did you invest in financial literacy?

We slog hours to earn a living but when it comes to managing that money, we fair rather poorly. And it does happen because we are not financial literate.

Therefore the first and foremost thing one needs to do is to invest enough time and resources to become financially educated.

Becoming financially educated doesn’t mean getting a degree but becoming aware of the first principles of money like compounding, ROI, NPV, inflation.

3. Income over lifestyle

In the contemporary era, most people are running after showing off the illusion of being wealthy, instead of actually being wealthy.

Being wealthy is a long term goal, something which materializes only at the later stage of life. This clearly implies that you will have to forego your present day luxuries if you wish to realise financial success in the long run.

Spending money never made anyone rich. This is as simple as anything can ever get. This is also where the importance of written financial goals manifests itself.

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Choose your expenses wisely so that you are able to meet your lifestyle needs but limit your wants which are discretionary expenses in nature.

4. Start right away

Compounding is that Eight wonder of the wonder that stands at the base of the first step that you can possibly take towards financial success. Added to the principal and rate of interest, the element of time can significantly impact how your investment grows.

The earlier you start with your savings, the earlier you are going to be able to meet financial success and plan your early retirement.

Don’t wait out to become a financial genius or seek the advice of a financial guru. Start as quickly as you can. Starting early will also allow you to ample time to grow your savings rate.

5. Wealth building on auto-pilot mode

You cannot possibly expect yourself to be able to manage each and every thing on a daily basis, can you? You can only divert some part of your attention and resources towards your retirement goals but what about the present?

This is where your auto pilot mode should be enabled.

You need to take certain financial decisions which will not only accrue a number of assets in your hand but also make sure that they grow over a period of time; so that your life can sail on smoothly.

The idea here is to allocate monthly income towards paying off money which builds equity assets for you in the long run.

Saving plans and investment clubs ensure that you are forced to invest and save your funds, whether you like it or not. So even if out of compulsion, you still manage to save your funds and build wealth in the process. Remember 401(k), IRAs?

6. Make your money hard to reach

Quite literally, just put your money somewhere so that you have to think twice before you reach out to get it back.

Imagine how different it’d be if you had cash lying in your wallet and if the same cash was stacked and shut closed behind the door of a locker. Which one would be the easiest to reach out to?

Similarly, once your money is invested in some retirement plan or investment scheme, you will have to go through some policies and possibly some penalties as well, before you can lay your hands on that money.

Therefore, define your financial plans to make it hard for you to reach your own money, so that you can resist the temptation to spend it.

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7. Don’t touch your social security

It is called social security for a reason. Stated simply, it is always easy to wash your hands in a running stream but not as easy when the water is stagnant.

The same applies to your earnings as well. No matter how large or important your need is, touching your social security should always be a last resort option.

Social security is meant to be used after your retirement, meaning that you may at the least, meet your daily expenses with the amount of your social security.

Hence, the longer you wait out to claim your social security, the better for your retirement.

Plan your expenses so that you may not need to meet your daily expenses out of your social security at present.

8. Focus on savings

While this may sound a very basic and obvious money skill, it is very hard to implement in reality.

The safest way to achieve this goal is to list down your average expenses for the month. You will be surprised at the quantum of your expenses when you undertake this exercise.

Having written them on paper, you will suddenly find the vision to analyse which expenses are wasteful and can be avoided.

9. Develop sources of passive income

It is always a good idea to develop multiple sources of income so that in case one dries up, others are still running and taking care of your financial upkeep.

Do you like to write? Then get yourself freelancing content projects or if you have a spare space, put it on AirBnB.

The idea is to create as many possible avenues to generate income. And once this extra income is generated, care must be taken to save it and invest it rather than spend it.

10. Plan your risks

As the saying goes, the higher the risk the higher are the returns. This however, does not mean that you blatantly enter the rat race and seek higher risk investments without giving them a second thought.

Based on your financial health, the risk that any person can afford to take is different. Hence, you need to evaluate your financial health and your ability to bear a loss, more importantly than the idea of earning a profit. This will perhaps give you a clear image of the risk that you can afford to take in the long run.

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Do remember when you are planning to retire early, capital preservation should be the top goal. Do access your risk profile first before investing in any financial instrument.

For example, cryptocurrency might be a suitable instrument to invest for those who have high risk appetite; whereas for those who are extremely risk averse, even equity seem to be a risky proposition.

11. Plan your taxes

While you juggle between your earnings, expenses and savings, there is one factor which is completely out of your hand but also stands as a compulsion, which is taxes.

As a resident of the country, you must be well aware about the taxation laws and how your earnings are taxed in one way or the other. This is where you need to use the scope of tax planning and try to save as many funds as you can.

Tax planning will also become relevant after retirement, when you will have to be very careful about your investments, which are also liable to be taxed.

12. Stay healthy

You might be wondering how health can take a centre stage when we are discussing about money skills. However, one needs to be healthy to enjoy the benefits of early retirement.

Besides, being healthy also ensures that out of pocket expenses (not covered by health insurance) on health care are at the minimum. Needless to say that you must have a decent health insurance.

13. Always prefer used cars

It’s a well known fact that cars usually lose around 20-30% of the value (depending on the make and the model) within first couple of years due to depreciation. It is a wise decision to always hunt for a used car since it has already taken the depreciation hit.

Besides, car is a liability that requires money for its annual maintenance and loses value with time.

If you are planning to retire early, you would want to invest in building assets rather than buying a liability.

14. Plan your mortgage

While the jury is still out on whether to rent a house or buy one, if at all you decide to buy one, make sure that you plan your mortgages carefully.

Taking a 30 year mortgage on your house will tie you up for the entire life. And with so many vagaries in professional life, chances are that you would find it difficult to maintain the financial discipline that is required for early retirement.

If you are planning to buy a house, try to repay the entire mortgage in 10-15 years. Start by taking a 30 years mortgage and try to increase your monthly payments every year.

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For example, if you are paying $2000 per month this year, try to do $2200 next year. And since this payment will be on auto-pilot, you will adjust to the new normal with time.

15. Vacation in off season

If you are one of those who like to travel, then this one is for you. You could save quite a fortune by vacationing in the off season.

Not only air tickets will be cheaper but also the hotels. And if you are looking for a short sojourn, then try to do it during weekdays rather than weekends.

These savings, over a period of time, would accumulate to become a sizeable portion of your entire savings bank.

16. Apply the 5% rule

This is not a proverbial rule but is practical and very effective. Stated simply, this means cutting down your expenses (by 5%) from top 3 expense categories every year.

To implement this skill, first of all list down your 3 top expense categories. Then break down expenses within those categories. This will show areas of improvement where money can be saved. Now to actually put savings into action, try to develop good habits that automatically do that for you.

For example, if your monthly expense on dining out is substantial and makes to the list, then try to find out reasons not to go outside; probably pack your lunch to office, or make a strict rule to eat only 2 times (say) a month.

A goal is pretty easy to achieve if it can be broken down into habits. Therefore cultivate good savings habits.

17. Track the progress

Last but not the least, track the progress:

Progress of savings, progress of investments and progress of how close you have reached to your goal.

Tracking the progress provides positive feedback to the tough financial discipline life you have been living. And that in turns provides more motivation to stay the course.

It also helps to benchmark the situation and take corrective measures if required.

The bottom line

Planning for early retirement is not that hard. All it requires is financial discipline (over long period of time); discipline to save as much as possible and invest wisely.

The path to (successful) early retirement lies not in the maths behind it (maths is easy) but cultivating good habits and the right mindset. So start now!

Featured photo credit: Unsplash via unsplash.com

More by this author

Ankit Garg

Serial entrepreneur and working towards Early Retirement

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Last Updated on April 19, 2021

40 Healthy And Really Delicious Meals You Can Make Under $5

40 Healthy And Really Delicious Meals You Can Make Under $5

Ever had those moments where you really wanted to eat something delicious and healthy but didn’t have the financials means to do so? Whether you’re a student or parent, this compilation of 40 great, healthy, and inexpensive recipes will make every night special and help you get fit! No more meals where you have to force the food down! It’s time to make that budget your best friend and turn it into great recipes. Enjoy!

1. Fish Tacos in Crunchy Shells ($3.56 per serving)

Is there a better way to end the day than a Fish Taco dinner filled with protein and nutrients and is easy on the wallet? This recipe calls for a boys’ or girls’ night in front of a good movie or game.

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    2. Mini-Meatball Noodle Soup ($3.43 per serving)

    We’ve heard of the delicious spaghetti and meatballs recipes, but imagine having that same meatball goodness in a soup? It’s like Christmas in a bowl. Healthy, warm, and only $3.43 per serving.

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      3. Spaghetti and (Vegan) Meatballs ($2.13 per serving)

      Now it’s time to look at the traditional spaghetti and meatballs recipe, but with a little twist: vegan meatballs. This way, you can enjoy the Italian tradition without adding on the extra calories. I’m sold!

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        4. Kabocha Squash and Lentils ($3.12 per serving)

        Absolutely delicious way to end the day with a Kabocha Squash and lentils dinner. The beauty of this recipe is that you can actually make many other things from the mixture, from dips to full-on meals. All under $5 per serving.

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          5. Baked Coconut Lentils ($0.91 per serving)

          Coconuts are always a good idea, but it doesn’t have to be eaten only for dessert or breakfast. With this great recipe, you can now eat a lunch or dinner filled proteins and a coconut twist. Yum!

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            6. Easy Marinated Roasted Chicken ($3.40 per serving)

            We love chicken and at less than $5 per serving, we are in heaven with this recipe. Add some vegetables and rice on the side and you’ve got yourself a full meal!

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              7. Organic Greens and Goat Cheese Gratin ($2.36 per serving)

              This is absolutely divine. You get in your healthy greens and your fat macros with this great recipe. Takes only a few minutes to make and it’s easy on the wallet. Bon Appetite!

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                8. Beef Pot Roast ($3.22 per serving)

                One word: perfect. This meal will warm your insides and fill you up with the high protein content.

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                  9. Fajita-Style Quesadillas ($0.43 per serving)

                  If you want to eat Mexican tonight but want to stay in your budget, this Quesadilla recipe is your best friend. It’s tasty and filled with healthy ingredients for less than a dollar per serving.

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                    10. Fish Tostadas with Chili Lime Cream ($2.82 per serving)

                    Another great lunch idea for the busy days ahead. Prep this in the morning or the night before and you’ve got yourself a healthy and cheap lunch meal!

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                      11. Beef and Black Bean Chili ($1.36 per serving)

                      Might not look like much, but this amazing chili is actually extremely healthy for you. The protein from the beef and the carbs from the black beans will fill you up in no time, and keep you full for a long period of time. Delicious and warm, just right for the winter!

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                        12. Crispy Fish and Peppers ($2.18 per serving)

                        Amazing recipe for anyone looking to change up their meals while keeping their macros in check and not going overboard on spending. Satisfies your crunch tooth (see what I did there?) and gives you all the protein you need to stay full and lean.

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                          13. Vegetarian Gumbo ($1.50 per serving)

                          You have the perfect macro mix here with the carbs, fats, and proteins. At less than $5 per serving, you’ve got yourself a meal that will last for the whole week!

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                            14. Mexican White Bean Soup ($0.99 per serving)

                            With the cold weather creeping in, it’s not a surprise that soups are coming back in style. This great Mexican White Bean Soup dish will keep you warm for winter without making a hole in your pocket.

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                              15. Black Beans with Mango & Cilantro ($0.38 per serving)

                              Mangoes make every dish a little bit sweeter, which is why we absolutely love this recipe. A normal rice and bean dish might be a little meh, but add the sugary taste of mangoes and you’ve got yourself a party!

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                                16. Bean Burritos ($0.71 per serving)

                                If you’re having people over tonight and don’t want to spend too much time or money on food, this dish is a great option! You can even cut up the burritos into pieces and make finger foods while everyone’s watching the game or gossiping.

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                                  17. Five-Spice Beef Kabobs ($2.43 per serving)

                                  The spices in this recipes add a delicious twist to the beef kabobs, which is definitely worth trying!

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                                    18. Cornmeal Crusted Pork ($1.92 per serving)

                                    If you like the fried crunch but want to opt for a healthier alternative, cornmeal is your man. This healthy recipe will satisfy all your fried desires without making you pop open your pant’s button.

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                                      19. Chicken, Tomato & Cucumber Dinner Salad ($2.57 per serving)

                                      Easy to do, extremely healthy, and super delicious. A must-try!

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                                        20. Lentil Soup with Beef and Red Pepper ($1.90 per serving)

                                        I can’t believe how cheap this meal is, especially for all the nutrients it contains. You can make a big pot on Sunday night and divide it into small portions to last you a whole week.

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                                          21. Smoky Mushroom Stroganoff ($1.90 per serving)

                                          Craving pasta but not sure what to top it off with? How about smoky mushrooms with a twist?

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                                            22. White Bean Tuna Salad ($1.36 per serving)

                                            You can add this White Bean Tuna Salad in your sandwich or just eat it as-is for a quick lunch on a busy day.

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                                              23. Sausage Eggwiches ($0.80 per serving)

                                              Who says you have to eat fast food to get an eggwich? This delicious recipe will give you an amazingly healthy eggwich for less than a dollar per portion. Can you say Breakfast?

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                                                24. Baja-Cali Black Bean Salad ($1.17 per serving)

                                                Great snack to add to a movie-night with friends. You don’t have to use chemically-processed salsas anymore, you can now use this homemade salad for your chip dips.

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                                                  25. Gnocchi, Sweet Corn & Arugula in Cream Sauce ($2.24 per serving)

                                                  Italians always knew how to make carbs look good! This delicious Gnocchi recipe will give your lunch a whole new meaning. Easy to make and only $2.24 per serving.

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                                                    26. Vegetable Lasagna ($1.73 per serving)

                                                    If you were looking for a healthy lasagna, you’ve just found it. At under $5 per serving, you can fill yourself up right away without putting on the extra calories.

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                                                      27. Fajita-Ranch Chicken Wraps ($2.05 per serving)

                                                      Don’t know what to make for lunch this week? How about delicious chicken wraps with a healthy ranch? This recipe will make all your lunches, even the quick ones, healthy and colorful.

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                                                        28. Quinoa with Pan Roasted Brussels Sprouts ($1.24 per serving)

                                                        A dish that has quinoa and brussel sprouts can’t be unhealthy, it just can’t, which is why this dish is one to keep in the books. Easy to make, healthy, and will keep you full for a long period of time.

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                                                          29. Butternut Squash Chili ($1.04 per serving)

                                                          You don’t need meat to make chili now that you have this recipe! It’s 100% healthy, filling, and smells absolutely delicious.

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                                                            30. Fast Shrimp Bisque ($2.03 per serving)

                                                            Seafood doesn’t have to be expensive if you know how to do it right, and this fast shrimp bisque is a great recipe to try if you’re in the mood for some seafood!

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                                                              31. Chicken-Noodle Casserole ($0.98 per serving)

                                                              Looks divine doesn’t it? This super easy to make dish will satisfy all your taste buds without burning a hole in your wallet or adding a few extra numbers on the scale.

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                                                                32. Burrito Cups ($1.18 per serving)

                                                                Entertaining someone tonight and don’t know what to make as appetizers? These burrito cups are a great alternative to chips or other greasy finger foods. All you need to enjoy it is a spoon and a cup.

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                                                                  33. Lemon-Dill Shrimp & Pasta ($2.45 per serving)

                                                                  Another impressive shrimp recipe under $5 per serving. The lemon-dill twist adds a great taste to the dish.

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                                                                    34. Potato Frittata ($0.87 per serving)

                                                                    If you want to eat potatoes for breakfast but still want it to be healthy, this is the recipe for you. At under a dollar per serving, this potato frittata will make you see potatoes in a whole new light.

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                                                                      35. Grilled Pork and Pineapple ($2.67 per serving)

                                                                      Meat and fruits? Oh, yes. The juiciness of the pork mixed with the liquid sugar in the pineapple will make you wish you knew about it sooner.

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                                                                        36. Greek Honey-Lemon Pork Chops ($2.15 per serving)

                                                                        Another splendid recipe mixing sweet and salty for a healthy meal. Easy to make and absolutely mouthwatering.

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                                                                          37. Jamaican Pork Stir-Fry ($2 per serving)

                                                                          You can add this healthy stir-fry to any dish as a side or amply enjoy it as-is for lunch or dinner. You can even make a wrap sandwich out of it if you’re in a rush to eat.

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                                                                            38. Herbed Salmon ($2.49 per serving)

                                                                            Salmon contains a healthy dose of fats that will boost your metabolism, lower inflammation, and make you happier. At under $5 per serving, need I say more?

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                                                                              39. Five-Spice Pork Kabobs ($1.96 per serving)

                                                                              Exquisite recipe under $5 per serving that will most definitely awe everyone at your dinner party.

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                                                                                40. Stuffed Sweet Potatoes with Mango-Black Bean Salsa ($1.24 per serving)

                                                                                You don’t have to eat sweet potatoes alone anymore with this flavorful recipe.

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                                                                                  Featured photo credit: Featured Photo Credit: 5 Dollar Dinners via 5dollardinners.com

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