Are you getting sick and tired of working? Want more time to spend with family and friends or just to enjoy life? Theses are the goals of many people once they’re in retirement. But what if you don’t feel like waiting until your 65 to retire? Early retirement is something on a lot of peoples minds, but can you do it?
Most people will agree that the reason they can’t retire early is because they don’t have enough money. So how can you make your money grow into enough to live off during retirement? Here are 5 tips that if you follow you will be able to accumulate enough wealth to go into early retirement.
5 Steps to Early Retirement
You can’t expect to retire with much money if you don’t save a portion of your current income on a regular basis now. And if your plan is early retirement, you will have to save even more!
Saving your money is a critical step to any kind of retirement. Without saved money you will miss out on investment opportunities to grow your money. The more you can save now, the better your retirement income will be later.
Creating a budget will help you track your inflows and outflows of money. A budget is a great tool to see where you’re spending most of your money and where you can save more. Download the Mint App if you need help tracking your finances.
It doesn’t matter how much money you make if you spend all of it… Many high-income households also have very high expenses associated with their life style. They fail to plan their retirement because they’re too caught up in living large. Here’s a very important point – It’s not what you spend, but what you save, that determines your wealth. Living below your needs is the smartest way the accumulate wealth and become financially independent.
Most people simply don’t make enough money to support their current life style in retirement. This is why you must invest a portion of your current income on a regular basis in an investment account (IRA/401K). By investing in the market you allow your money to grow and your interest earned on that money to compound. With regular contributions to your retirement account and the effects of compounding interest, your money can grow to huge amount over the long run.
One of the most important factors that has a huge impact on when and what you retire on is timing. The earlier you start, the more retirement income you will accumulate. According to the Rule of 72, if your money is invested and gets a average return of 12%, your money will double every 6 years. This means if your current retirement portfolio is currently at 500,000, in just 6 years it could be at $1,000,000!! See what a huge difference just 6 years can make? If you wait too long to invest you miss out on a lot of money and possibly your goal of early retirement. 🙁
Having a plan is essential to accomplishing many of your goals in life. If you plan to retire early it’s even more important! Use this free tool to estimate how much money you will need to have when you retire to support the life style you want to live. This tool is very helpful in making out your plan, and it allows you to input your own data. By manipulating the numbers you can see what it will take for you to accomplish your specific plan – Investment Calculator.
In conclusion, if your goal is early retirement it won’t be easy, but, it is very possible to achieve. By following some simple steps and figuring out some other ones on your own, you will be sitting yourself up for financial freedom.
