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How Anyone Can Retire at 32

How Anyone Can Retire at 32

While this may sound like an outlandish statement, this goal remains more than achievable in 2014.

“Sure,” I can hear you say, “you could win the lottery, for example, or inherit a financial windfall from a beloved and wealthy relative.” Each of these eventualities may enable you to retire immediately, while also negating the need for you to ever work again.

While this is true, such a goal can also be accomplished through hard work, frugal living and sound financial planning. This is why early retirement is an option that remains accessible to everyone, although whether you not you choose to chase such a dream is entirely up to you.

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Retirement Age

    Leading by Example: A Template for Early Retirement

    In order to illustrate how this is possible, I will be using the example set by a close family friend of mine. He is now 33 and officially retired last year, although he still likes to invest some of his hard-earned income into profitable ventures and schemes. He no longer works for others, however, and nor does he operate full-time as a freelancer or independent contractor. This is a dream that he pursued relentlessly and strategically from the time when he was studying at university, as he decide at the age of nineteen that he had no desire to work full-time within a soulless corporation.

    The exact inspiration for this life goal is unclear, although he was obviously influenced by the experience of his parents. They toiled hard for an entire generation; retired in ill-health at 65 and barely had enough money to live the comfortable life that they deserved. He drew great inspiration from this, and vowed not to give so much of his life in pursuit of such intangible returns. Instead, he developed a clearly defined and fast-tracked plan for financial independence, which would begin in earnest at the age of 22 and ideally end with his official retirement a decade later.

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    As he was studying marketing, he initially decided to combine his studies with freelancing as a content writer and online consultant. He started during his second year at university, and spent 9 months or so developing his reputation and working for relatively low levels of remuneration. In year 3 he increased his client range and fees, however, and set out to earn £48,000 per annum after taxes during this 12 month period and repeat this throughout the following decade. While this figure was conservative, he would at least be able to avoid VAT liability and higher tax rates in the process.

    Execution and the Importance of Frugality

    In real terms, this plan translated into spendable income of roughly £4,000 per month. This is where the execution of the plan came into play, as he deemed it realistic to save an estimated 70% of this monthly income into a high-yield savings or investment account. The remaining 30%, or £1200 in simple terms, would be used to live on and settle all outstanding bills. This worked seamlessly during his final year of studying, and by the end of this, he had managed to save an annual total of £33,600 at a generous interest rate of 8%.

    Once he had left university, he found it far more challenging as he faced a constant struggle to keep living costs down. Although having just under £15,000 per annum to live on is far from ideal, he felt that his ability to adopt a frugal lifestyle would ultimately determine whether or not this could be done successfully. So he quickly began to minimize costs, initially by moving back in with his parents temporarily and accessing real-time promotions to cut everyday costs, such as food, beverages and those associated with energy consumption.

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    As the years progressed and he continued to hit his savings targets, so too he developed even more frugal living measures. These included embracing the thrift market, and investing in second-hand clothing and accessories. He also decided to travel exclusively on public transport, even cycling or walking where routes and distances permitted. Over time, his seemingly far-fetched dream became an actionable and strategic plan, which quickly evolved thanks to patience, discipline and an ability focus on a single-minded goal.

    How to Use This Lesson to Fund Your Own Retirement

    By the age of 32, my close friend had managed to save £33,600 at a fixed interest rate of 8% for 11 consecutive years. This had created cumulative savings of more than £520,000, which could then be used to fund his retirement and achieve life-long financial goals. Almost immediately, he plowed £150,000 into a modest but functional home of his own, and distributed £300,000 across various investment savings accounts with interest rates with variable risk and interest rates of between 6 and 8%. He then used the remaining £70,000 to create an investment portfolio that included shares and other derivatives, and strived to turn this into incremental profit over time

    He is now enjoying the fruits of his labor, and lives comfortably while having the power to determine when and how he invests. This is a template that can easily be followed by anyone, although each individual must apply their own interpretation and translate this into a retirement plan that suits you. It is imperative that you visualize your retirement and determine exactly what you want from it, before implementing a viable time frame and actionable strategy. You may not wish to invest your capital once you have officially retired from work, for example, which means that you may need to save for longer and create a large fund to live on.

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    Another key lesson to learn is the importance of frugality, which is crucial if you are to turn a seemingly fanciful vision into a realistic and achievable goal. As this example proves, early retirement of any description is only possible if you remain focused and are willing to make significant sacrifices with regard to your lifestyle, as otherwise you will be unable to save the requisite amount for the required period of time. Without a commitment to frugal living, you will be forced to work longer and delay your individual retirement plans.

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    Published on September 17, 2018

    How Being Smart With Your Money Leads to Financial Success

    How Being Smart With Your Money Leads to Financial Success

    Achieving financial success is not something that just happens. Maybe if you win the lottery or something, but for the average person like you or me, it comes from a series of small steps you take over a long period of time.

    With each step, you form a new smart money habit. And with each smart money habit, you build towards financial independence.

    So what sort of habits can you form to get on that path? Let’s take a look at smart money habits you can start today to get you closer to a financially independent future.

    1. Avoid being “penny wise but pound foolish”

    It’s tempting to try saving a couple cents here and there when buying small items. However, that’s not where the real money is saved. You’re putting in extra effort for something that doesn’t move the needle.

    You get the most bang when you’re able to cut down on your bigger bills. For example, finding a lower interest rate for your mortgage could save you $50+ per month. And cutting your transportation bill by purchasing a cheaper car or taking public transportation can provide large gains as well.

    So, look at your recurring expenses such as housing, transportation, and insurance, and see where there’s wiggle room. It’s a much better use of your time than trying to pinch pennies here and there on smaller purchases.

    2. When you want something big, wait

    Impulsivity can get you in trouble in most aspects of life. Finances are no different.

    It’s human nature to see something and want it right then and there. It starts as a kid in the checkout line at the grocery store, and it continues on through adulthood.

    We get an idea in our head of something we want, and it’s hard not to go out and get it right then.

    A good example is wanting a new car. Perhaps you’ve had your car for several years. It’s crossed the 100k mile mark. Maybe maintenance is due, and you’re annoyed that you need to replace the timing belt or purchase new tires.

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    So, you get the itch.

    You start digging around online, and you realize you could trade in your current car for something newer and more exciting… all for a few hundred bucks a month. Then you get obsessed.

    Here’s where you have to take a step back.

    Your newfound obsession is clouding your judgement. Rather than giving into the impulse, wait it out.

    Set a timeframe for yourself. Maybe you come back to the decision three months down the road. See if the obsession lasts.

    It might, but often, a funny thing happens. Often, you forget about it. And often, you find that the new car wasn’t a need at all.

    The impulse faded. And you just saved yourself a ton of money.

    3. Live smaller than you can afford

    You finally get that big raise. And you want to celebrate – and why not?

    You’ve been looking forward to this forever. And after all, it was all due to your hard work.

    That’s fine, splurge a little. However, make it a one-time deal and be done.

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    Don’t get caught in the trap that just because you’re now making more money, you should spend more.

    Too often, people get more money and feel like they that gives them the means to buy a bigger house, a bigger car… you know the drill. Resist.

    The fact is that living smaller than what you can afford is one of the fastest ways to build savings.

    But if you constantly upgrade as you begin to make more, then you’ll never get ahead. You’ll just build up more debt along the way and have just as little wiggle room as before.

    4. Practice smart grocery shopping

    Food… it’s one of the biggest portions of any budget. And if you’re not careful, it can be one of the biggest drains on your wallet.

    But luckily, there are a few things you can do to ensure that you stay smart with your money when buying groceries.

    Create a grocery budget

    Set a strict weekly grocery budget. When you know how much you can spend on groceries, you can then plan your weekly menu around it.

    Once you know what all you need, you can go shopping and keep a running tally as you shop to ensure you’re on track.

    I tend to do this in my head, rounding for each item. However, writing it down as you go would probably work best for most people.

    Make a list… and never deviate

    Never go to the grocery store without a list. If you go to the store with a ballpark idea in mind, you don’t have a true ide of what you need.

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    You’re not well-researched. You don’t know what the sales are. As a result, you’re going to make decisions on the fly.

    These impulse decisions will lead to overspending, which will derail your grocery budget.

    Eat before going grocery shopping

    It’s also important to eat prior to going to the grocery store. Hunger is a powerful force.

    If you’re shopping on an empty stomach, everything is going to look good. In particular, you may find a lot of ready-made, processed snacks will look enticing.

    After all, you’re hungry now and that food is easily available. So subconsciously, you may lean towards those items.

    Unfortunately, not only are those items typically less healthy, but they’re likely more expensive. You pay for convenience.

    However, when you eat prior to shopping, then you’ll shop with a clear mind. Your hunger won’t cloud your judgement, influencing you to make poor decisions like a cartoon devil resting on your shoulder whispering in your ear.

    This makes it much easier to stick to your grocery plan.

    5. Cancel your gym membership

    Now that you’re all set on your food, it’s time to get smart about managing your budget in terms of physical fitness. And let’s begin by avoiding the gym. The gym bill, that is.

    The average gym membership costs around $60 per month. That’s $720 a year.

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    Yet, two out of three gym memberships go unused. That means two-thirds of people who have a gym membership are literally giving away almost a thousand bucks a year. It’s crazy!

    I recommend seeking an alternative. One good alternative is to look into fitness streaming services.

    Streaming services allow you to stream hundreds of workouts like Insanity and p90x, right in your own home for around $10-20 a month. That’s $40-50 less a month than the average gym membership.

    Of course, then there’s the free option. The internet is full of free workouts that you can do on your own with minimal or no equipment.

    For example, there’s the Couch to 5K program, that I personally used a decade ago to ease myself from couch potato to running my first 5K race. If I could do it, anyone could.

    Then there are free resources like reddit that have limitless information on workouts. The Fitness subreddit has done all the research for you, populating workout tips and detailed workout routines for anyone to use in their wiki.

    There are several routines that require no equipment. And you can join in on the subreddit to become part of the community, making it easier for those seeking comraderie and encouragement in their fitness goals. All for free.

    It’s baby steps… And baby steps can start now!

    I’ve never met anyone that can’t stand to be a bit smarter with their money. And on the flip side, anyone can get smarter with their money. But remember, it doesn’t happen all at once.

    Begin by fighting your impulses. Prepare for the week and be smart at the store. And cut monthly expenses like gym memberships that are overpriced and you probably aren’t getting your money’s worth out of anyway.

    The devil is in the details. And the details can change your lifestyle and prep you for a financially independent future.

    Featured photo credit: Unsplash via unsplash.com

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