Across the country and around the world, millions of people sit in their office, stand behind a cash register, or go to a construction site and dream about being able to retire early. They long for the financial freedom, the ability to travel, and the extra time that comes with retirement. The following are a few steps that can take that dream and turn it into a reality.
Make Some Adjustments to Your Budget Now
A common refrain heard in retirement planning is, “Live now like no one else, so that in the future, you can live like no one else.” The idea is that if a person curtails their spending now, they will save money that will allow them to live a more luxurious life in retirement.
Some people have lived on 50 percent of their income and put the other 50 percent into their retirement savings. Many focus on wiping out debt and cutting down on large and small expenses. They become quite creative when thinking of steps they can take to save money, be it on transportation, utilities, or housing costs.
Some people have become part of the gig economy. As weekend warriors, they spend their free time making money that they can devote to their retirement savings.
Set a Clear Goal for Your Financial Future
A mistake that many people fall into is not knowing how much money they will need when they retire. A good rule is to have 25 times the amount of your planned annual spending. If you think you want to spend $50,000 a year, have $1.2 million saved away.
The idea behind this is that the money that you have now is invested, so it continues to grow. The second rule is the four percent rule. The idea is that in the first year of retirement, you can pull four percent of your invested savings. Each subsequent year, adjust the amount of money you withdraw based on inflation.
Part of this means investing with future growth in mind. If you will retire early, you will have less time to save money. And you will have a longer amount of time that the money you saved will need to support you. It may be recommendable for you to take a small percentage of your savings and shift it into higher risk and higher yield investments. Once you retire, you can shift your money back to safer investments. This will allow you to tap into it without being worried about loss.
Planning for the Unexpected
No matter how hard you try to save for retirement, unexpected emergencies will pop up. These might include sudden health issues, critical home repairs, or necessary vehicle repairs. It is best to use savings to cover these expenses, if you have saved up enough. However, if the expenses are greater than your savings, there may be times when you might want to consider short-term alternatives such as cash advances online. This type of assistance may help you get past an unexpected emergency and back on your feet.
These are emergency sources of cash. They are not designed to cover nonessential wants. If your goal is to retire early and a situation arises where you need to take a cash loan, the next step would be to repay the loan as quickly as possible. This way, you can diverge your funds again to your savings as opposed to being concerned about a growing interest rate.
There are countless individuals who put in the work, take control of their finances, save, and retire early. Early retirement may be in your future as well if you take steps now to plan for it.