• Thursday, May 30, 2024
businessday logo

BusinessDay

Want to retire early? Follow these steps

businessday-icon

Many of us want to retire early. That early retirement age might be 35, 40, or 50, but the idea is to retire sometime before the age of 65 and start enjoying life — before age and infirmity catch up with you.

The reality, though, is that the dream of early retirement will remain a dream unless you take action.

Here are 5 steps to take that will help you reach your goals of early retirement:

•Make early retirement a priority 

You say you want to retire early, but have you made the necessary commitment? Look at the way you use your financial resources. What do your actions say about your financial priorities? If you really want to retire early, you have to make it a priority — and you’ll have to make tradeoffs. That means that you have to give up less important things in the present in order to achieve your long-term priority of early retirement.

•Be Realistic in your expectations 

Next, you need to look at your financial situation realistically. If you’re 35, have no savings plan, and $10,000 in your retirement account, you’re going to have to make some very big changes in order to retire by age 50. Look at realistic investment returns (not the 10% predictions that many tout for stocks), and plan for conservative returns. Any plans you make must be based in reality.

•Create a plan 

Armed with the willingness to commit and realistic expectations, it’s time to create a plan. Your early retirement plan should help you save enough money each month to reach your retirement goals. This means that you have to consider cutting your expenses, and changing what you do with your money, in order to meet the requirements of your plan. And don’t forget about having an investment strategy, as well. Investing is the only way to build up enough wealth to retire early and comfortably.

• Make your plan work 

You need to put effort into making your plan work. This might mean cutting unnecessary expenses from your budget. It might mean spending less and hoarding your money until you reach your goals. It’s true: trying to retire early can mean sacrifice now.

Another way to make your plan work is to increase the amount of money you make. If you know you won’t make your goal of early retirement in 20 years and you just can’t cut it anymore, try to earn more money. Improve your marketability so that you qualify for a pay raise. Start a side hustle. Look for ways to increase your income so that you can put more money towards making your early retirement plan work.