Early retirement may seem like a dream but with proper planning it is attainable.
There are many ways to achieve financial independence. Below are ten tips to help you achieve your goal for early retirement.
1. Create A Plan
You need to create a retirement plan and establish a savings goal. Retiring early is not only about money but also about time. Therefore, it is important to know what you want to do once you have achieved financial independence.
A good plan includes but is not limited to:
- Investments
- Wills & Trust
- Life Insurance
- Debt Management
- Disability Insurance
- Cash Flow Management
- Property / Personal Property
2. Invest Early
If you want to retire early, invest early. Your wealth will have more time to reap the benefits of compound interest. A person that invests in an IRA starting at the age 18 vs age 25 will see a big difference in their overall amount saved overtime.
Roth Investment Examples Below:
Age Started: 18
Amount Invested: $5,500 per year
Return Rate: 7%
Marginal Tax Rate: 25%
Roth Investment Examples Below:
Age Started: 25
Amount Invested: $5,500 per year
Return Rate: 7%
Marginal Tax Rate: 25%
3. Increase Savings
The key to early retirement is not how much you make but how much you save. The earlier you start saving, the earlier you can reach your financial goals. You don’t have to wait to start saving. A penny saved is a penny earned. Save your pennies, set up a proper savings vehicle and enjoy your life as you become one step closer to financial independence.
The graph below will show you the average households savings rate in the United States from 1965 to 2018.
We can see that besides a couple peaks and troughs the average consumer savings rate in America is around 6%. This is due to American lifestyle being more of a consumer society. The average American gets about a 5% increase every year at work. Just saving half of this 5% will help you get closer to achieving your goals.
4. Be Prudent with Your Savings
There is a difference between trying to save and being a saver. Thinking of saving as a lifestyle now can help you achieve a spending lifestyle in early retirement.
5. Take Control Of Spending
People who wish to retire early, need to take control of their cashflow by speaking with a financial planner. By managing your spending you can find savings opportunities.
6. Reduce Household Expenses
If you want to retire early, you don’t have to make major sacrifices. However, you do need to make educated financial decisions. These decisions can include setting up a proper financial vehicle for retirement, college savings, entertainment expenses and a rainy day fund. By making small lifestyle changes by finding efficient ways to grow your money you can live a fulfilling and happy life.
7. Eliminate Debt
Debts can become the most dominating wealth-reducing tools in your arsenal. Some quick tips to reduce debt is to pay off high interest loans quicker, consolidate your debt to a lower interest rate and take advantage of 0 interest financing. The sooner you pay off your debt, the more flexible you become.
8. Adopt Healthy Habits
Adopt healthy habits. These can help you live longer, and minimize your health expenses. It also plays a significant role in the rate you pay for your life insurance.
9. Make Sure Your Plan is Flexible
It’s not enough to just save money. You also need to have a a little flexibility in your plan. Life throws you unexpected curve balls. Sometimes you swing and get a strike, while other times you swing and hit home runs. Working with an advisor can help you come up with a customized investment plan that will be flexible with your lifestyle.
10. Create Ways for Passive Income
You are your biggest generating asset. There are only so many hours in a day and so much you can do. Having your money invested in a diversified portfolio can help you generate passive income while you focus your time on the important thing in life. Yourself!
How Can I Retire Early?
You don’t have to find new sources of income, just rethink your existing spending and saving habits. The trick is in doing it regularly. Contact our retirement planner in Sugar Land so we can help you achieve your goals. You can email us or call: 713-540-7247.
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