Early retirement is a concept I never heard of until I started reading personal finance literature. I’m younger, so that could be the reason as well but nevertheless, I was fascinated by stories of people who were able to retire in their 30s and 40s and live the rest of their lives how they pleased. It really sounded like a dream.
I entered the workforce myself when I was 18 and after 3 or 4 years of working odd part-time jobs, I became extremely annoyed with working and dealing with people who I didn’t like from week to week. I remember I kept thinking ”I have at least 30+ more years to work so I can’t get tired of this now” and at that point I would just cringe.
Fast forward to now, I’m in a much better job (thankfully) and I feel motivated to wake up each morning and go to work. I discovered the wonderful world of side hustling and realized I have the ability to wake up each morning, jump out of bed and do something I love to generate an income.
Not only that, but I can control the amount of money I’m able to earn each month instead of waiting around for my employer to give me a raise. If I want a raise, I have the opportunity to find more people to hire me for my services. Yes I too, even fantasized about early retirement once or twice.
The Truth Is, I Have No Idea When I’ll Retire
Yes it’s true and I know I’m not the only one. As a millennial, my generation is bombarded with copious amounts of debt that can ultimately delay our retirement and make early retirement seem like just a silly dream.
I’m sure you already know the cost of higher education is increasing every year contributing to the $1 trillion Americans carry in outstanding student loan debt. Not to mention, when millennials walk across the stage and graduate, it’s bitter sweet because our generation makes up about 40 percent of the unemployed population in the U.S. and it’s a bit of a challenge to find a job right out of college.
My generation also wants to be independent more than anything and practicing delayed gratification is often the last thing on anyone’s mind. I may not be so sure of when I’m going to retire exactly, but I know I don’t want to be working when I’m 65 so I guess I’m shooting for ‘partial retirement’ or ‘earlier retirement’ if that’s a thing. Here are a few things you can do if you have a similar goal.
Pay Off Your Debt
This is a no brainer. Debt is a ridiculous financial drain and a waste of time and energy in my opinion. Paying off all your debt early will eliminate costly interest and other fees that could suck up more of your money.
The most interesting question someone asked me last year was “why am I rushing so much to pay off my debt when I have plenty of time.” I mean, I do have at least 10 years to pay back my student loans and 5 years to pay off my car. My answer is simple. Debt is a huge unwanted roadblock that’s standing in the way of my financial success and I want it gone ASAP.
That’s what this blog is all about. Once I get rid of my own debt, I’ll help others get rid of theirs too. So if you still owe a lender, create a plan of attack, sacrifice, increase your income and do whatever it takes to get rid of that balance once and for all. The road ahead looks so much clearer without debt holding us back.
Know Your Net Worth
Checking your net worth is so crucial regardless of any conflicting advice you may receive. It’s important to know where you stand and what your assets are. There’s no way you can even start to plan earlier retirement if you haven’t checked your net worth.
Mine is currently in the negatives due to my debt but I like to see my progress as the months go by. Soon I’ll be in the positive if I keep my momentum up and keep investing consistently.
Tracking your net worth doesn’t have to be difficult or time consuming. I’ve personally never been able to navigate through the tedious process of updating a spreadsheet. Personal Capital, a free wealth management system that lets you track and categorize your finances and assets, net worth, and investment portfolio, has a really cool net worth calculator you can use to manage all your assets and debt because it’s so important to become aware of your net worth and how much money you need to be able to retire.
Make Investing a Priority
The sooner you start investing, the better. Compound interest is the magic ingredient needed to help grow your nest egg and allow you to be able to retire earlier. Debt can be a huge distraction from investing though. Even I have made a habit out of prioritizing my debt over investing in my retirement. Being in debt will definitely slow down the rate at which you are able to save and invest but it’s not the end of the world.
If you can’t max out your 401(k) or Roth IRA this year it’s best to just contribute something consistently each month. Investing in the market or a property will help create passive income and build a foundation for your income to be diversified.
Establishing passive income is crucial is you want to retire earlier and pulling from multiple sources of income will help strengthen your finances to be able to withstand unexpected expensive. Your 20s and 30s are the golden years for investing, so it’s important not to let the opportunity to start early pass by.
Live Below Your Means at All Times
I’m always preaching about living below your means on this blog. So why not another sermon? It’s so important to adjust your lifestyle to spend less than you earn so you can have plenty of money to save each month.
Growing up I used to see people I knew and family members blow so much money on vacations, fancy dinners, new cars and the latest gadgets. I used to envy them because I thought they had so much money. Now that I’m older, I realize that they don’t have much to show for their large spending habits. The fancy electronics broke or went out of style and the cars got old and lost their value.
Those people are still working and unable to retire. This is not something I wanted for my life. If you’re trying to retire early or even have the option to stop working when you get older, you should avoid lifestyle inflation and commit to living a life that you can afford with plenty of money left over to spare. Whether you want to call it being frugal, cheap, or penny pinching, when you live below your means your bank accounts, net worth and future self will thank you later.
Do you know when you’ll be able to retire? What steps are you taking to prepare for retirement?
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