Most people crave early retirement. It gives you enough time to work, travel, and relax on your own. But it’s not as easy as it seems. It takes incredible discipline, savings, investment, and hard work to achieve early retirement. This article will share some tips to help you retire early and possibly achieve financial freedom.
However, early retirement is relative. And it means different things to different people. But if you understand what early retirement means to you, it’s easy to work towards achieving it.
If you want to spend your retirement life traveling and doing the things you love most, the following tips will help you achieve it;
Tips to Help You Retire Early
#1. Define What Early Retirement Means to You
Like I mentioned earlier, early retirement means different things to different people. That’s why defining what early retirement means to you is one of the tips to help you retire early.
if you aspire to retire early in life, you would have to define what early retirement means to you.
To some people, retiring early means not having to work for anybody again and doing the things you love. It also means living on the money you have saved for retirement.
And to other people retiring early means achieving financial independence. It means leaving the corporate environment to start up something more creative, something you enjoy doing and gives you enough time to have fun.
Whatever early retirement means to you, you have to define it before you start working towards it.
The easiest way to define early retirement is to think of what you will be doing for the rest of your life.
Do you want to start that business you have always been passionate about? Or do you want to engage in hobbies like fishing, golfing, pottery, woodworking, sightseeing, etc.?
Once you decide on what to do with your life after retirement, it’s easier to define what early retirement means to you.
#2. Take Inventory of Your Financial Life
Taking inventory of your financial life is an important tip to help you retire early. Generally, when taking inventory of your financial life, you must consider two things – your net worth and your annual spending.
Your net worth is what you have left after removing your liabilities (what you owe) from your assets. Your net worth is different from your income. It’s your current financial standing, which could be negative or positive.
If you are heavily indebted, your net worth will be negative. And this could affect your financial independence and your ability to retire early.
Your annual spending is also one of the things you should consider when taking your financial life inventory.
Your annual spending gives you an idea of your spending habits and notifies you if you live above your means or not. It’s an essential financial variable you must work on if you want to head towards early retirement.
Here are tips to help you reduce your annual spending;
- Divert your bonuses into your savings.
- Eat more at home and reduce the number of times you eat out.
- Don’t go to the store without making a grocery list. Otherwise, you will end up buying things you didn’t plan to buy.
- Set a monthly shopping limit.
- Cancel unimportant club membership and entertainment bills.
- Use a budgeting app for your finances.
#3. Try to Live Below Your Means
One of the mistakes most salary earners make is to live above their means. You may not be able to retire early if you live above your means. It will literally eat away your savings and put you in more debt.
Retiring early means you have to sacrifice somethings to have a better and brighter future. And that includes living an expensive lifestyle.
You can’t save and invest your money aggressively if you are living above your means. Here are some of the tips to help you live below your means;
- Make it a habit to create a budget every month.
- If possible, don’t apply for credit cards.
- Spend what is left after saving your money, not the other way round.
- Have multiple streams of income.
- Imbibe a saving culture.
- Negotiate your rates and bills.
#4. Make Smart Investments
One of the best tips to help you retire early is to make smart investments. It’s not going to be easy, but you may need to invest aggressively, depending on your current situation.
There are several retirement investment strategies out there. But always go with the one that fits your current financial situation.
Again, try to diversify your investments. It’s not advisable to rely too much on one investment. The world of finance is constantly changing, so putting all your eggs in one basket may not be the best retirement strategy. In any case, it is advisable to seek the help of a licensed financial professional to develop a strategy that is right for you.
Here are 5 things you should consider before investing in your retirement;
- Before you make any investment decision, try to understand your investment options. For a start, participate in a workplace investment plan like; 401(k) or 403(b).
- Learn how your social security benefits, pension payout, and other income fit into your overall retirement plan.
- Carefully consider your investing timeline before committing to any investment.
- Factor inflation into your investment decision.
#5. Consider a Health Savings Account (HSA) for Health Benefits
One of the fears of people who want to retire early is health care costs. It’s expensive, and if you aren’t working for a full-time employer, you may not be getting those health insurance benefits. This will make you have to spend out of pocket for your health insurance.
However, if you are contemplating early retirement, you should consider a health savings account. It’s one of the tips to help you retire early.
HSA accounts and a high deductible health plan enable you to contribute tax-free and withdraw from qualified tax-free expenses.
Any amount you contribute to your Health Savings Account will be there for as long as you want. Even if you change employers, the money will still be in the account.
And if you don’t withdraw from the account, you can still use the funds to pay your medical expenses after retirement.
These are the tips to help you retire early. Anybody can go on early retirement, but you have to plan towards it. It requires a level of discipline and sacrifice. But in the end, the effort will be worth it.
Tycoono Media Inc. and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. You should consult your own tax, legal, financial and accounting advisors before engaging in any transaction. Please refer to our disclaimer for more information.