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Published on December 24, 2020

How To Retire Early (And What To Consider Before You Do)

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How To Retire Early (And What To Consider Before You Do)

When it comes to knowing how to retire early, the process is both simple and complicated. It is simple for those who understand how to do it and are ready to put in the effort and discipline to have enough to retire early. But the process is complicated for those who have no such understanding.

Have you realized how easily some people make millions? Have you also realized how challenging it is for some to make a living? This is the reality everywhere around the globe.

In many countries, the normal retirement age is between 60 and 65. At this age, a person has worked for 40 years or probably more. Many people work for 40 years with a decent salary but end up depending on social security for survival after retirement.

This shows that having a decent job with good benefits is not enough to retire comfortably, let alone retiring early. Is a good job a solution? If not, then what is?

This article will not only teach you how to retire early but also how to retire early and rich. If you start following the steps in this article, you can retire in 10-15 years as a millionaire.

4 Things To Remember If You Want to Retire Early

To retire early, you have to make enough money to guarantee a decent living after retirement. This has to be done early. The process is simple:

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  1. Earn more money.
  2. Spend wisely.
  3. Save and invest wisely.

However, before we look at the process, we must keep in mind the following important points:

1. Set Your Retirement Goals

Setting goals

is the first step to any major achievement. They show you the way and help you know when you get there.

These retirement goals should answer the following critical questions:

  • What is retirement to me? This can be not working again, leaving formal employment and starting your own business, or just doing what you are passionate about.
  • When do I want to retire? Do you want to retire at 20, 30, 40, or 50? This will help you evaluate the amount of time you have to achieve your goal.
  • How much should I have at retirement? What net worth do you want to have at retirement? How much income should your assets bring you every month after retirement?
  • What kind of lifestyle do I want to have after retirement? Some people want to retire and travel the world. Others want to retire and just spend time with family. The lifestyle you want to have after retirement should dictate how you live today.

2. Understand Where You Are Today

When heading to a certain destination, you have to understand where you are currently to know the shortest and most convenient route to take to that destination. This calls for an honest evaluation of your current circumstances. Do a thorough life audit to get this understanding.

3. Evaluate Your Options

After setting your retirement goals and understanding where you are currently, you need to evaluate the options. You can start a business, get a better job, invest in real estate, get a financial advisor, and all that.

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4. Know the Way Forward

What options will I take? After understanding all the options available, you need to choose an option or a combination of options. These options will guide your actions moving forward.

After answering these questions, there are specific actions that will help you retire early. We will divide them into the three major steps we pointed out earlier. These are: earn more, spend wisely, and invest prudently.

Earn More Money

This is inevitable. To retire early, you have to earn more than the average person. This will enable you to invest more and get financial freedom faster.

Earning more money is not easy. If it were easy, everyone would be doing it. After all, everybody wants more. You need financial education, effort, and discipline to make more than you are making today.

As we pointed out, your lifestyle after retirement should guide your actions.

1. How to Retire Early to Rest

If you want to retire early and spend time with family or rest, there are several steps that you can take to earn more. These steps will give you enough to pay for your bills after retirement.

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They include the following:

  • Get a second job. For those who are employed, a second job can increase your income at the end of the month. You can then live off one income. This will give you more investment capital to push you to your retirement goals. I have an employee who works for me during the day and then takes other jobs at night.
  • Get a better job. You can a job with better remuneration if you want to make more money. However, you need to increase your level of education and specialization.
  • Renegotiate your current remuneration terms. You do not need a better job if you can make the current one better. Renegotiate the terms with your employer to make more every month.
  • Start a side hustle. A side hustle will bring extra dollars at the end of the day. This can be a small business that you run in the evening and during the weekends. You can also employ someone to run it on your behalf.

2. How to Retire Early as a Millionaire

If you want to retire early as a millionaire and travel the world, you need to take a different path.

Here are the following things you should do:

  • Start a scalable business. To become a millionaire, your business has to serve thousands of people. Here, the business idea should be working. The business should have working systems that can run even without you having to work every day.
  • Use other people’s time. People who retire early understand how to leverage other people’s time to make more money. Successful people give money to buy time while average people use the time to get money. This is the difference. This is why the richest people have thousands of employees in their companies.
  • Use other people’s money. To get more money, you need to invest more. In this case, you need to know how to utilize debt to your advantage. Debt is a catalyst for financial growth. It is also important to be cautious because debt can be a catalyst for financial distress and disaster.
  • Work smart. To retire early as a millionaire, you cannot just work hard, you need to work smart. Working smart means achieving more with less. Get more by investing less time, effort, and resources. It can also mean earning without having to work.

Spend Wisely

It does not matter how much you earn if you cannot spend it wisely. To retire early and retire rich, you have to spend little as you can and invest the rest.

The following actions can help you spend less:

  1. Track your spending. Record everything you purchase in a book and do the math at the end of the month. Consider whether what you bought is adding value to you or it was just an unnecessary expense.
  2. Only purchase what is necessary. To retire early, you only need to spend on what is needed, not what you want. Is it a need or a want? A need is something you cannot do without. A want is something you desire but is not necessary. Only buy needs.
  3. Sell your greatest liabilities. Liabilities take money from your pocket. They reduce your economic value. To spend less, you need to dispose of your greatest liabilities. If you have several SUVs, you can dispose of them and purchase a fuel-efficient car. This will save you money every day.
  4. Avoid consumer debt. Consumer debt will ruin your financial future. You will incur unnecessary interest payments without making anything from the debt. As Robert Kiyosaki says, when you take a loan, do not pay for it. Let others pay for it. This means that you have to invest the debt and use the profits from your customers to repay the debt.
  5. Live your life. One of the best ways to avoid unnecessary expenses is to live your life. Avoid unnecessary influence to upgrade your lifestyle. Do not keep up with the johnnies.

To retire as a millionaire, you have to spend as little as 10% of your income. However, to retire early with just enough to spend, you can follow the 50-30-20 rule.

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The rule says that you should allocate 50% of your income to your needs. This includes paying your most necessary bills like rent, food, school fees, taxes, etc. Also, invest 30% of your income on wants. These are things that increase your standard of living but they are not necessary. They include cars, a bigger house, a vacation, etc. Then, invest at least 20% of your income on investment. This is the bare minimum.

Invest Prudently

You cannot retire early and rich without becoming an investor. It is the investment that multiplies what you have into what you want to have.

Investment is a risky area because money can easily go down the drain. This is why most people fear even the term itself.

To invest prudently, the following are important:

  • Get financial and investment intelligence. This is what most people lack. They cannot distinguish between a good investment and a bad one. This is why they find it easy to play it safe and keep what they have as is.
  • Take calculated risks. This means that you do not just throw your money ignorantly into a project. You have to do your due diligence and gather as much intelligence as you can.
  • Overcome fear. Fear is common in all of us. However, successful investors overcome it. The rest allow it to stop them from doing what they have to do.
  • Overcome greed. A good investor is ambitious but not greedy. It is greed that causes the average person to lose money. As they rush desire quick returns, they lose everything. As Warren Buffet says, a good investor is cautious when others are greedy.

Final Thoughts

If you want to retire early and rich, you will need to come out of your comfort one. You will need to get knowledge, change your attitude, take risks, make moves, and become your best version.

As I pointed out, if it were easy, everyone would do it.

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More Tips on How to Retire Early

Featured photo credit: Nguyen Thu Hoai via unsplash.com

More by this author

Mark M. Gachunga

Founder Wealthy Wolves Consulting Ltd and Giimark Education & Publishers Ltd

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Last Updated on July 20, 2021

Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

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Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

Have you ever considered your life now, and how it would be if you had more time to spend with your family and less worries about money?

Nowadays, financial stress is one of the most troublesome weights in life. If you’ve ever encountered financial stress, you know the difficulty of not having enough income to pay your obligations or bills.

Many people say that money is not the ultimate goal of life. While that’s true, money certainly plays a very significant role. The meaning of financial freedom changes with the different phases of our life, but ultimately, it is something that many people strive for.

In this article, we’ll explain how to capture that financial freedom you’ve been looking for. Read on to learn the secrets to financial freedom.

Break Free of Your Finances

Financial freedom is about having a constant flow of cash from your assets to cover all your regular needs.

When you are not worried about your income, or living paycheck to paycheck, you gain a great sense of freedom. It’s the freedom to be obtain and do what you truly need to make your way through everyday life.

Gaining financial freedom, though, is a process of growth, making small improvements and gaining emotional strength.

Though it seems hard to believe, it is really very simple to get financial freedom.

To do so, you simply need to make sure that your assets exceed your liabilities. In other words, you’ll need to find the sweet-spot where your residuals meet or surpass your expenses. This is something that you can achieve with the proper plan.

While not every person will accomplish financial freedom, the potential for anyone to do so is certainly there. Anyone can achieve this success, regardless of their income level.

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Outlined below are 9 secrets that will help you in your goals of achieving financial freedom.

1. Stop Unnecessary Spending

We often spend money inwardly, instead of objectively.

For example, you may spend when you’re anxious, depressed, restless, exhausted, from fear of missing out, or to please others. This is a very unhealthy way to handle your finances.

To stop this habitual spending, log down all your spending over the course of a month.

Just as some people keep a food diary, keep an expense diary. Remember not to just write down how much and what you spent the money on, also include the circumstances of why you spent the money. Was it an impulse buy at the checkout line or was it something you planned to purchase?

This increased self-awareness could enable you to avoid triggering situations in the future when you are considering an impulse buy.

2. Plan a Monthly Budget

This is a great opportunity to get serious.

Take a seat with your spouse or partner and make a monthly budget based on your income, not your expenses. You are never again going to spend more cash then you have on hand.

Overspending is the thing that led you to more financial obligations. Make sure you decide every month what is coming in and what will be going out and stick to that budget… no matter what.

3. Cut-up Credit Cards

Perhaps you are the type of person who always pays your credit card balance in full before the end of your billing cycle, and enjoys the reward points you gain. If this is the case, then you’re already way ahead of the game.

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If not, you may want to consider ridding your life of the burden that credit cards bring.

Many cards have strategies set up so that if you make a certain number of late payments, they will raise your interest rate much higher. This can really add up in the long run and you won’t be doing your financial situation any favors. If you’re prone to late payments or have a large balance due on your cards, cut them up!

Without proper self control on credit card spending and payments, you are basically throwing your money away. To ensure that you have better control over your spending, use only cash or debit for all future purchases (and don’t forget to pay at least your minimum payment on your cut-up cards each month!).

4. Increase Savings

There is no doubt that for a comfortable retirement you must accumulate satisfactory savings throughout your working life.

It’s good practice to save up to 15% of your income.

Start with your workplace 401(k), if you have one. If not, a Roth IRA (if you are eligible) or a traditional IRA (if you are not eligible for the Roth) are the next logical steps.

Increase in longevity means you might be able to look forward to 25 to 30 years in retirement, or possibly even significantly more. Investing now in good retirement plans will ensure that you have a guaranteed a stable monthly income when the time comes to stop working. [1]

5. Invest Wisely

Consider investing in funds.

Specifically, you will gain higher returns if you invest in different types of mutual funds such as Debt funds, Equity funds and Hybrid funds with a proper balance, although it absolutely relies on your personal preferences and sense of risk taking.

To get the most of these benefits, make sure you are investing in a variety of assets. Another resource of investing in mutual funds is SIP (Systematic Investment Plan) where you invest some money every month in funds. SIP works by averaging the per unit price of the stock.

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Mutual fund investors are aware of the benefits of an SIP (Systematic Investment Plan). For one, it is the most secure way to invest in equity mutual plans so that wealth is created over a long period of time. This plan also helps you to gain a better sense of financial discipline, which will come in handy in all your financial endeavors.

6. Invest in Gold

There isn’t really a better way to invest in gold than to have the physical gold itself in your possession.

You can purchase gold coins and bars from mints as well as from coin dealers and other private sellers.

Another way to invest in gold is through ETFs (Exchange Traded Funds).

These are is similar to mutual funds but they are exclusively investments of gold. ETFs are great because they offer more liquidity; the ETF owns the actual physical gold, stores it, and retains the value of the shares. These shares can then be bought and sold in the stock market, and one big benefit is that the transaction costs of gold ETFs are much lower than the that of physical gold.

With its consistently-increasing demand, investment in gold can be very wise long-term investment to make.

7. Stash Emergency Funds

Whether it’s a cash gift or a work bonus, always try to save any extra money that comes your way rather than making unneeded purchases.

If you get paid every other week, you’ll get an “extra” paycheck (three rather than the usual two) twice a year. Either save those paychecks towards your emergency funds or utilize the money to pay down other obligations, such as loans, credit cards or other debts.

Make it hard to get your cash.

Put your savings in an alternate bank, maybe an online bank that forces you to delay for several business days before transferred money hits your regular bank account.

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8. Find Fabulous Mentors

Find a mentor, such as a friend or family member, who has exceptional control over their finances and pay attention to everything they do.

If you do not have any friends or family that are enjoying financial freedom, then find a mentor online! There are numerous blogs and guru websites featuring the advice of many people who have reached financial freedom, and they exist primarily to let you in on how to achieve it for yourself.

There are also plentiful forums available that share tips and tricks on how to best achieve financial freedom. Read as much as you can and start changing your habits for the better.

9. Be Extra Patient

Patience is the key of financial success.

Being patient can be quite tough, especially when you’re struggling with your finances, but having faith is worth it. You’ll continuously be on the right track if you are taking the proper steps above.

So don’t be discouraged, even if you are only saving a few dollars a month; it all adds up. Within just a few years you’ll look back proudly at your accomplishments and be glad that you had the patience to get there.

Financial Freedom for All

Anyone can achieve financial freedom, regardless of their financial circumstance.

Use the tips provided above to get yourself on the track to financial freedom and toss your monetary concerns out the window. If you wish to achieve a life with financial freedom for yourself and your family then you must adopt a disciplined approach towards your finances.

Following the simple secrets above is a great start to making your money work for you, so you can work less and live more!

Featured photo credit: rawpixel via unsplash.com

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Reference

[1] Hartford Gold Group: IRA Retirement Accounts

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