Everyone dreams of a good retirement. Sometimes it is allthat gets us through the day at our job, picturing what we will do in our freetime once we’re finally done with our tiresome routine. You might want totravel or embrace that one hobby that you never seem to be able to find thetime for. All this is only possible however if you are financially stable andnot looking for ways to make money even after you retire. In order to befinancially stable without working after you retire, you will need a plan.
There are two main factors that determine how early you can retire. These are how well/quickly you build your net worth and how much you stay out of debt. These are the two things that can help you gain financial independence and greatly increase your chances of early and peaceful retirement. If you don’t see yourself working the pensionable job or for a company, you should probably look for other ways to generate revenue.
These passive income streams, which require little to no effort on your part, help you keep the money rolling in so you don’t solely have to rely on your income. This could be in the form of investments like owning shares in a business. It could also be owning some real estate which brings you some amount of rent per month. Today we are going to go through some strategies to help you be more financially efficient and in turn, Independent.
How much doyou need?
Every person has a unique lifestyle, which means every personhas a unique budget. Consequently, each person needs to save a slightlydifferent amount in order to have a comfortable retired life. Your first stepshould always be to calculate how much you need to save. If you have anycomplications like pending loans etc. discuss your situation with a financialplanner. If you have a fairly simple financial life, use an application orwebsite that uses an algorithm to calculate your required saving. It takes yourincome, spending and a rough estimate of the time you want to retire tocalculate how much you need to be saving per month in order to retirecomfortably at the given time. One recommendation is to take your annualspending and multiply it by any number between 20 and 50 to get a roughestimate of how much you might need.
Having this number is a great help because now you have adefined goal to work towards and can easily track your progress.
In order to make enough saving to retire early, the firstthing you need to cut back on is frivolous or impulsive spending. You will needto give up habits like binge shopping or shopping just for fun. Theseultimately lead to you having a large number of unwanted items and this isalmost always a problem in first world countries. Changing these habits andoptimizing your budget is what will give you that financial edge over everyoneelse and allow you to save much more on the same income as others also meaningyou can retire earlier than them. It might take a bit of effort but it willdefinitely be worth the work you put in. Shop only for necessities, if you’reshopping for fun or just to feel better when you’re down you need to break outof it.
Make moremoney maybe?
I know it sounds obvious. You would if you could right? Weknow. However if at the end of the month you are completely broke and don’thave enough to cover your expenses even after you’ve cut down on extraexpenses, you NEED to make more money not only to make ends meet but to startsaving. Starting to save as early as possible is what gets you across thefinish line. Do whatever you need to, get an extra job, work as a freelancer,invest in a business or learn how to earn from the stock market. There areplenty of ways to get that little bit extra that you need. If you are ahomeowner you could consider renting out part of your home in exchange for aregular monthly income. If you own business you could try and get it to a pointwhere you don’t have to be present anymore and the money just rolls into yourshare and others do the work for you.
Startbefore the race begins
The world works on interest-based banking these days. Mostpeople make the mistake of thinking that they will have plenty more money whenthey are older and will be able to save for retirement more easily. What theydon’t realize is that money is worth much more now than it will be in thefuture. Meaning if you were to put a 1000$ in the bank right now, it would beworth much more after a few years, and so worth more than a 1000$ invested afew years later. If you’re wise you won’t miss out on the benefits of earlyinvestment. One report by CNN claims that if you can save 30000$ over thecourse of your 20’s and early 30’s for your retirement, it will be worth morethan 300000$ by the time you retire. I’ll let that statistic speak for itself.
Get out ofdebt
Use your credit card as little as possible, pay your bills ontime, do NOT let your debt accumulate. This is your first priority, you don’twant to be paying interest on older bills, it’s a waste of your money
Make yourmoney make money
You need to generate some sort of passive income, somethingthat keeps the money coming in even when you’re not working;this could be an investment, a business or creating and owning something uniquewhich you can continually exchange without additional effort like a software.