The 5 Ways To Make Sure You Can Retire Early For Financial Freedom

The old days of working for a company for 30 to 35 years and then retiring on a fat pension provided by said company are long gone. For starters, there is no way that somebody could stay in a job that long even if they wanted to. These days layoffs happen very fast to keep shareholders happy and the ones with the highest salaries are the first to be let go.

And, although many employers offer a good 401k matching program, pensions are a thing of the past. What’s the answer, then? The answer is to take things into your own hands and give yourself a chance to not need to wait that long to retire.

The way things are these days, you can’t rely on anybody else to make sure that you have what you need to live your best life.  Instead, focus on retiring early so you never have to be in a position where getting laid off can dash your dreams. It will take some serious planning, but people are already doing it so it is possible. 

In this article, I will go over what it takes to make retiring early a reality.

1 – Figure out your number

There are going to be a lot of calculations to make, but you have to crunch the numbers to get an idea of what kind of numbers you are going to need to make your early retirement happen. Using a retirement savings calculator is a good place to start as you can get an idea of what you are going to need to put away to hit the number you need to live on. 

This means that you need to know how much money you will need to live off for a year. Once you are able to make sure that your investments and savings will be enough to provide that then you know what you need to save to have it happen. The ideal scenario is that you are able to retire with no debt so you can have that number be much smaller and more attainable.

Make up a spreadsheet in which you list out all of your monthly expenses. Categorize them so you know which area you are spending the most money in and that way you can see which expenses you will likely have. For instance, if you are paying a loan on a car, then that will likely be removed later since it will be paid off. At least it should be paid off, which brings us to the next point.

2 – Pay down your debt

True financial freedom comes from having no debt. Debt ties you down and influences all of your decisions. Where you work, where you live and also how you live are all affected by needing to pay debt. 

If you have a lot of debt heading into early retirement, then chances are you will have to make some tough decisions and may regret retiring early as a result.

Focus on paying down or removing as much debt as possible as soon as possible to avoid having debt when you retire. 

This means that if you are paying a loan on a car right now, you should focus on paying it off as quickly as possible. Or, you can sell it and buy an older car that’s still in good condition and pay cash so you can get rid of your debt burden.

It also means that you should be concentrating on paying down your mortgage so you can get to your retirement age without that hanging over your head. The less debt you have then the less money you will need to have coming in when you hit your target age.

3 – Make investments

To really accelerate your timeline you need to have your money working for you too. There are only so many hours in the day that you can work. It’s like sending out little workers that make money while you do other things.

You have two basic choices. One, is to go high risk high reward. If you are good at picking winners, then you may want to take this route and see if you can make a lot of money off of good investments. The downside, of course, is that you can also lose your money if they don’t work out. It’s always a good idea to get professional advice before making any kind of investment.

The next option is to play it safe and go with low risk low reward investing. That’s something like putting money in index funds that don’t pay out big dividends but are safer investments that pay out slowly and steadily.

Investing in stocks can be pretty hard, it’s why you should always invest in something you believe in. Take Altos stock, for example. They focus on cellular rejuvenation and are attempting to reverse disease to transform medicine completely. You’d essentially be investing in something good. However, they’re yet to have an IPO, meaning that altos labs stock still has to be bought privately. An IPO might be on the horizon, but it’s just conjecture at the moment.

Investing in the stock market is a vital part of any investment strategy; you just have to make sure you believe in the stock and do your research before buying. A great way to research is by using platforms like HALO Technologies for stock analysis. You can make it easier on yourself by investing in funds instead of individual stocks. However, you do lose an element of control if you go down this route. If you’ve got the time and inclination, you’d be better off doing your own research to invest in individual stocks that you truly believe in.

4 – Go minimal

The easiest way to make sure that you can retire early is to set up a life now that is not very extravagant. You should be very mindful about your spending and set up habits now that can continue to your retirement. This doesn’t mean that you have to live a spartan life devoid of any kind of lifestyle.

It simply means that you shouldn’t be spending money just for the sake of it. The more you can cut down on your spending now, not only more money will be saved, but you will be able to live with less money when you want to retire.

5 – Make more money

If you can increase your take home pay from your job, work a second part time job, or even start an online business in your spare time, then you can supercharge your savings and investments. 

Let’s do a quick calculation to give you an idea. If you were to make an extra $500 per month that you put under your mattress, then in 20 years you will have $120,000. Now imagine if that $500 went into an index fund or an IRA, or your 401k. This can be a substantial amount of money that can have you retire in comfort in just 20 years.

Running an ecommerce store can be done in your spare time and has the possibility to make much more than $500 in profit per month. Even a part time job will likely make you more than that.

 

*This is a collaborative post.