Okay, You Want Early Retirement, What Are You Doing About It?
You say you want to take early retirement, but are you doing everything you can to make that happen? If not what is stopping you? Maybe you aren’t sure what stops you from saving, investing and planning for early retirement. So let’s talk about that.
Planning for early retirement is like planning for any other goal, it requires dedication and focus. When you are dedicated to a goal you do not let anything get in your way. You meet every challenge and road block or barrier head on. Nothing gets in your way. You are unstoppable. Your invincibility is due to setting a goal that you truly believe in. With that in mind, before you can commit to a goal of early retirement, you have to truly believe in that goal. You have to believe that retiring early is possible to achieve. You have to know why you want to retire early and what it will take to accumulate enough money to do so.
Like with any goal, there will be road blocks. Before you can eliminate those road blocks, you have to identify them. After you know what they are, you will need to take the steps to overcome them.
What’s Stopping You From Early Retirement
Step #1 – Get A Plan
You need a plan, without a plan, you probably won’t get very far. Without a financial plan, you cannot make sensible spending and saving decisions. Sometimes using the professional guidance of a financial planner is necessary, sometimes not. If you want to try creating a plan by yourself first, start with the basics.
Track how much you currently spend and then your actual fixed and variable expenses. Determine if there is a large gap between what you spend and what you should be spending. If there is, you are living beyond your means. So, find expenses that can be cut back, and then save the difference.
Next, make some projections. How much do you think it will cost you to live in retirement? No idea? Then look at your expenses, which ones will be still be around once you retire? For example, will you still have a mortgage or rent payment? Will you still be commuting to work or will that expense be eliminated? How much will health care cost? Is that expense being picked up by your employer right now? There are a lot of figures, calculations and projections to be made in order for you to plan early retirement…which is why you need to start with a plan, even if it’s just a basic one.
Step #2 – Stop Spending So Much, Start Saving More
If you spend everything you make, what’s left for saving?
If you want to retire early, delay the spending gratification. You have to make a choice between short-term satisfaction and long-term fulfillment. Stop spending everything you make to support your current standard of living. Instead, cut back on your current standard of living so you can save more in your retirement accounts. Keep a budget, live below your means. All of those ideas sound easy, but implementing them may be a bit challenging, so tackle one at a time.
Step #3 – Be Prepared For The Unexpected
Set up an emergency account, you know, one of those rainy day funds you read so much about. The best emergency account is the one with 6 months of your current income. You may become unemployed, you may have uninsured medical expenses, you may have unexpected home or auto repair expenses. Who knows what will come up. If you have money set aside in your emergency fund to pay for these unexpected expenses you will not be reducing the amount of money you are investing into your retirement accounts.
Step #4 – Maximize It All
Using your employer as an excuse will not help you achieve your retirement goals. If your employer does not offer a retirement plan at work, do not use that as an excuse for not contributing to some type of retirement account. Individual Retirement Accounts (IRA) can sometimes be just as good of a retirement investment as an employer sponsored retirement plan like a 401k. IRA accounts offer tax-deferral and tax deduction benefits. The IRA contribution limit may not be as high as a 401k plan, but some retirement investing is better than none. And, if you are over age 50, the catch-up contribution is available.
Step #5 – Ask and Learn
With all of the information available to you in books, magazines, websites, blogs and the internet, lack of knowledge about resources available to you is flimsy excuse for not knowing how to invest and save. In other words, there are endless ways for you to learn about investing. If you are unfamiliar about the rules of IRA or 401k investing, learn them. if you are unsure about what type of investment works best in a 401k, do some research, ask for help. If you need advice on how much to contribute to receive an employer match, find out. Do not be afraid to ask for help. To reach your goal of early retirement, you need to step out, you need to ask and learn. Your retirement means more to you than to anyone else, so do not be shy about finding the best help available.
Step #6 – Reset Your Priorities
The only amount of money that will be there when you retire is that amount that you sent ahead. If you truly want to retire early, make that your top priority. Do not get distracted by spending your money on current day pleasures and fun instead of investing it for your future retirement. If you do, you will probably not reach your goal. Retiring early is a nice goal to have. It is possible to achieve, people are doing it everyday. Set an age or a date that works for you. Aim high, focus and make it happen.