Most people in their early 20s are planning an early escape from the rat race so they plan to retire early. Whether it is to stay away from stress, pursue their passion, start their own business or just simply stop working, people want to have the freedom to do what they want while they have the time.
However, early retirement should be carefully planned. Whether you want to retire at the age of 50 or 60, it is very tricky that you have to take calculated steps to make sure you are prepared for this next act in your life.
Here are some steps you need to take if you are serious about learning how to retire early:
Step 1: Decide what you will do on your retirement
Before you decide on what age to retire. you need to know what you’ll do when retirement comes. Do you want to travel the world? Build your own business? Do you plan to take care of your grandkids? Deciding what you will do on your retirement will determine your budget.
Step 2: Calculate your retirement budget
When you are on retirement, you will still need to pay for living expenses. And when you will retire will depend on how much you will need to live for each month. At this point, you can create a mock retirement budget to have a glimpse of how much you will need for retirement. Your budget will look different and will depend on what stage you are currently in your life. But it’s good to be prepared in advance.
Step 3: Calculate your annual spending
Once you have envisioned your retirement budget, it’s time to get real. Are you used to spending less money while you are still working? That’s good news. If not, create an estimate on how much you will be spending including paying off your payday loans from licensed moneylenders while you are on your retirement. Spend time to look at your current monthly expenses and assess which are the things that you can live without and eliminate them on the budget list. Track how much money goes in and out of your account every year. By doing this, you are able to evaluate your current financial situation and this eliminates the guesswork.
Step 4: Start living within your means
It is very challenging to build a life with substantial wealth when you spend more than what you have. When you are approaching early retirement, it is important to know that this is NOT the time to spend aggressively. This is the time to live within your budget. Focus on reducing your expenses such as food, housing, and transportation to increase your savings. Make serious lifestyle changes. Clear out your debts and do not plan to acquire more debts. You can also get some seasonal work if you still want to earn an extra income. If you are dreaming of early retirement, be ready to make some adjustments in your life.
Step 5: Focus on investing
Can you imagine an early retirement without any investments? You wouldn’t want to pour your money solely on living expenses. You will surely want to make your money grow. You may want to eliminate some expenses to make way for investments. Some areas that you can cut your budget are clothing, gym memberships, entertainment expenses, clothing, and subscription services.
Step 6: Consult a financial advisor
If you want to be more proactive in managing your money, meet regularly with a financial advisor. This can help you maintain control over your finances and you will be guided with every decision that you will make with the help of a professional.
Early retirement is a lot to think about. No matter how ready you are, there can still be mishaps along the way. Always revisit your retirement dreams. What will your daily routine be like? Do you plan to travel with your spouse? It is important to keep your expenses in check and don’t go on a spending spree. You have devoted years of your life in your career, but the hardest job there is having the discipline to spend your money.
There’s also no shame in wanting to have an extra income while on retirement. There will be a time that you will get bored while in this new stage in your life, it is inevitable that you will have to find something to do, might as well make money out of it. Whatever your decision is, it is important to have the discipline in handling your retirement money. Continue to save, invest your money but don’t forget to enjoy your retirement years.