What does it take to retire early? Is it having 30 times what you annually spend or perhaps setting a motion an investment plan that regularly pays out? Early retirement comes in many shapes and forms. But to do that, make sure you follow our 5 tips.
Plan the Retirement Date
The first thing you want to do is to roughly plan the exact retirement date. Maybe it’s your 50th Birthday or something else entirely. But the first thing everyone that plans to retire young and financially independent should know is when that is going to happen.
Doing this will help drive you to work harder than ever to reach your goal in the desired time frame.
Define How You Want To Achieve It
The next thing everyone should do is define the means to achieve early retirement. For a lot of people, this can mean a lot of different things. For some, it’s about gaining passive income each month that will enable them to live a life without needing to clock a single hour. While For many others, it’s about growing a company and selling it for a huge profit that will set them for life.
But regardless of how you’re planning on achieving it, it’s all about defining it early. Much like the previous tip, this will motivate you to work harder to achieve your early retirement plans and achieve financial independence. If you’re thinking of launching a startup and turn it into a multi-million dollar business, then it’s all about doing it the right way.
That means starting the business legitimately, lowering startup costs, and marketing it the right way. Find cost-effective ways to run business operations will make it easier to manage your business. Thus, you should look at the most cost-effective ways to market your startup.
Define Your Finances
You can’t retire early if you have no idea how much money you have. This is one mistake that many people do when looking at the chance to retire young. But how do you define your finances? The first thing to do is to calculate your net worth.
Net worth is a measurement that is used to determine how much financial and non-financial assets you own. This value is put against the value of your liabilities. Calculating your net worth isn’t difficult to do. First off, you will need to list your assets and then your debts. Subtract the debt from the assets, and you’ll have a rough estimate of your net worth.
Define Your Target Number
While we can easily say that we want to retire before hitting 50, what does that actually mean? What amount of money do you hope to have by that time? You can’t retire young or live life financially independent if you don’t define the actual number of cash that you want to have to achieve it.
At the beginning of the article, we mentioned that early retirement can be owning 30 times your annual expenses. Considering that 39% of Americans want to retire early before the age of 55, it means having enough money to live out the rest of your days.
As one can imagine, defining the target number can be very difficult. That’s because quite a lot of factors will impact your decision. You never know if a recession is going to destroy your investments, or a tornado destroys all your rental properties.
These are events that no one can anticipate years before they happen. We might anticipate that a tornado is going to hit your city in the next few weeks, but we have no way of knowing years in advance.
Define Other Strategies To Help Achieve It
The last tip is all about doing everything you can to achieve early retirement. While you have already defined the means of achieving early retirement, you can do all kinds of small things to help do that as well. From saving early to living below your means, there are tons of ways to help.
You can also focus on reducing expenses to save even more. Your biggest expenses could be a mortgage, gas money, food, and more. Finding clever ways to reduce these expenses will help you save money that will ultimately come in handy when planing early retirement.
Spending less than the average American, less than $60,000 annually, is a very common strategy for early retirement.