Early retirement doesn't have to be a pipe dream. Many people achieve this goal even on moderate incomes. The key is to be focused and organized. The following tips can help you develop a plan that will take you toward your dream of early retirement:
#1: Streamline your expenses
Your first task is to minimize the amount of money you spend. Cook at home and avoid dining out, drive an older car with no payments, and start looking at the second-hand market for your needs as well as your wants. Opt for the bare minimum on cell phone plans and drop the cable – there are plenty of free or nearly free entertainment options available. Set a monthly budget but then treat it as a game of how low you can go. Anything left over in a budget category can be thrown into your retirement savings for later.
#2: Maximize your savings rate
If you are serious about early retirement, then you need to ignore advice that tells you to only save 5 or 10 percent of your income. You should be striving for at least a 50 percent savings goal. This means all of your bills and expenses must be less than half of your income. Some people take on a temporary job to achieve this goal, while others save money by lowering the above expenses or even moving to a cheaper home.
#3: Set a realistic goal
How much do you need to retire on? The math for this is simple – multiply your expected years in retirement by your annual financial needs – but it is easy to overestimate. The key is to be realistic about expenses. If your home and car are paid off and you have no other debt, you can likely live comfortably on 30k a year in a low cost of living area, or like a king on 50k. Don't fall for the trap that you have to have hundreds of thousands available yearly for retirement. The next part of the equation is to determine how much to save to hit your retirement number. Many early retirees use the 4 percent rule – their retirement nest egg will return 4 percent annually on average, so they need to save enough so they can live on that 4 percent return without touching the nest egg.
#4: Diversify your investments
Now that you have the number for retirement and have worked out how to save, what do you do with it? If you are young, you likely want to diversify between low-risk investments, like index funds, as well as higher risk stock options. If you are new to investing, it is a good idea to do research, as well as get help from a stock market analyzer.
Retiring early isn't a dream or only for the rich. With planning and research, you can also live the dream. Contact a company like outlawstocks.com for more information and assistance.