Everyone dreams of a good retirement. Sometimes it is all that gets us through the day at our job, picturing what we will do in our free time once we’re finally done with our tiresome routine. You might want to travel or embrace that one hobby that you never seem to be able to find the time for. All this is only possible however if you are financially stable and not looking for ways to make money even after you retire. In order to be financially 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 do you need?
Every person has a unique lifestyle, which means every person has a unique budget. Consequently, each person needs to save a slightly different amount in order to have a comfortable retired life. Your first step should always be to calculate how much you need to save. If you have any complications like pending loans etc. discuss your situation with a financial planner. If you have a fairly simple financial life, use an application or website that uses an algorithm to calculate your required saving. It takes your income, spending and a rough estimate of the time you want to retire to calculate how much you need to be saving per month in order to retire comfortably at the given time. One recommendation is to take your annual spending and multiply it by any number between 20 and 50 to get a rough estimate of how much you might need.
Having this number is a great help because now you have a defined goal to work towards and can easily track your progress.
Streamline your spending
In order to make enough saving to retire early, the first thing you need to cut back on is frivolous or impulsive spending. You will need to give up habits like binge shopping or shopping just for fun. These ultimately lead to you having a large number of unwanted items and this is almost always a problem in first world countries. Changing these habits and optimizing your budget is what will give you that financial edge over everyone else and allow you to save much more on the same income as others also meaning you can retire earlier than them. It might take a bit of effort but it will definitely be worth the work you put in. Shop only for necessities, if you’re shopping for fun or just to feel better when you’re down you need to break out of it.
Make more money maybe?
I know it sounds obvious. You would if you could right? We know. However if at the end of the month you are completely broke and don’t have enough to cover your expenses even after you’ve cut down on extra expenses, you NEED to make more money not only to make ends meet but to start saving. Starting to save as early as possible is what gets you across the finish 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 are plenty of ways to get that little bit extra that you need. If you are a homeowner you could consider renting out part of your home in exchange for a regular monthly income. If you own business you could try and get it to a point where you don’t have to be present anymore and the money just rolls into your share and others do the work for you.
Start before the race begins
The world works on interest-based banking these days. Most people make the mistake of thinking that they will have plenty more money when they are older and will be able to save for retirement more easily. What they don’t realize is that money is worth much more now than it will be in the future. Meaning if you were to put a 1000$ in the bank right now, it would be worth much more after a few years, and so worth more than a 1000$ invested a few years later. If you’re wise you won’t miss out on the benefits of early investment. One report by CNN claims that if you can save 30000$ over the course of your 20’s and early 30’s for your retirement, it will be worth more than 300000$ by the time you retire. I’ll let that statistic speak for itself.
Get out of debt
Use your credit card as little as possible, pay your bills on time, do NOT let your debt accumulate. This is your first priority, you don’t want to be paying interest on older bills, it’s a waste of your money
Make your money make money
You need to generate some sort of passive income, something that keeps the money coming in even when you’re not working; this could be an investment, a business or creating and owning something unique which you can continually exchange without additional effort like a software.