Is it possible to achieve early retirement? We believe it is!
Retiring early seems to be getting harder and harder to achieve these days. However, what if we tell you that it is possible for everyone? All you must do is start planning early and define what retirement really means to you. Next to that it is all about spending wisely and keeping track of healthy financial habits so you can reach financial independence earlier and retire when you want, on your terms. Let’s look at how to get started together.
What is Early Retirement?
Firstly, it is crucial to define what ‘retirement’ means to you as a person. Often, many people think that retirement relates to reaching financial freedom and never having to work again. However, that’s not necessarily the case for everyone. Retirement does not only have to be about money and that is what many of us forget very often.
Perhaps to some, retirement means leaving a corporate job and starting that yoga class they always wanted to join. To some it is about spending more time with loved ones or spending more time traveling and exploring the world. Some of us look at retirement as a period to think and reflect, learn and look at life differently. It is for sure, a very personal thing.
Whatever it is that defines retirement for you, it can only be found inside yourself. Think about what it really means before you start chasing it and keep in mind that you can be retired while still being at work. It is all about perception and how you look at things.
Establishing How Much You Need to Retire
It is tricky to determine the absolute amount of wealth you need for early retirement unless you start calculating and putting numbers on paper. We advise to start by creating an outline budget of your envisioned living expenses when retired. Include everything that you’ll have to pay for daily and monthly. Don’t forget housing expenses, travel expenses and more. While this budget does not need to have precise numbers for each item, it is best practice to make the estimation as accurate as possible. You don’t want to ruin your future dream due to a small error in your calculations.
Once you have your yearly expenses defined, we suggest multiplying them with 25. The outcome, according to Listen, Money Matters, is the estimated minimum size of the wealth portfolio you will need to take on retirement, assuming you securely withdraw 4% of the portfolio amount annually to live on.
Live Below Your Means
We have all experienced what it is like to overspend. It is a common mistake everyone has been through at some point in life. And yes, we know, it is not a great feeling at all! Addressing this challenge could help you go a long way, especially when you have a clear road to early retirement in place. Living within your means is one of the key points to work on.
Start by focusing on cutting out unnecessary expenses. List out for yourself what the specific costs are you can do without. Think about food, transportation, shopping and more. Once you have created a list of the above, start implementing changes one by one as it will increase your success factor. Reprioritizing spending is key. You will be surprised how much you can save weekly!
More Money, More Savings
It sounds so obvious, but we all know it is true. Making more money will allow you to save more money. Take on a weekend job, think about freelance gigs or aim for that promotion in your current company. Saving more will help you reach your final retirement goal earlier. It is as simple as that!
Track Your Expenses
Keep track of your finances on a weekly basis. Look at your income while at the same time, monitor your spending habits. Personal finance management makes saving for retirement more fun! You will feel much more in control and you will experience a very clear road to success.
Retirement can be reached early if you apply the above tips and tricks. Don’t forget to make sure you define what retirement exactly means for you as a person first. Take one small step at a time and you’ll be on your way to before you know it!
