Tips For Retiring Early

As Market Watch calls it, retirement just means being financially independent. Many people live decades reminiscing about a day that they won’t have to work so hard to pay their bills. Many can’t wait to retire so that they can start living. As the living costs grow, so does the retirement age, but here are some tips to help you reach your goal of financial freedom.

1. Understand Numbers
The first thing to do when you want to retire early, is understand how much money you’ll be able to live off. Typically, if you’re retiring, all of your bills and mortgages are paid off. You’ll have to calculate your monthly living and emergency expenses and figure out how much money you can actually live off while saving the rest of your income in long-term investments such as 401k or Roth IRA. One couple saved $1 million dollars in four years to retire at age 43.

2. Spend Less, Save More
It seems simple enough, but the key to having money in the bank is to spend less and save more. A majority of Americans spend money left and right on things that they don’t actually need, but want. For example, Americans spend half their food budget on eating out at restaurants. Groceries have also gone up in price over the years, and retail has been booming. In March 2010, families spent over $500 a month on shopping alone. The key point is that Americans are spending their income on unnecessary things rather than investing their money for saving. The best ways to save money is to be thrifty, including groceries are much cheaper (and healthier) at your local farmer’s market. Stores such as Aldi and Trader Joe’s are also great for saving money on food because they have healthy choices at the lowest prices they can sell at. Starting with changing your household spending is a great way to begin your early retirement process.

3. Invest
You don’t have to have a finance degree in order to invest your money. For one, every person who works full-time should have some sort of savings plan, whether through a Roth IRA or 401K. Another popular form of investment is housing. Owning a house will allow you to raise equity, but also have a backup plan in case of emergencies. As long as your mortgage is paid off, you can always sell your investment and get the cash for it, especially because housing typically goes up in price value. This is the easiest form of investment.

4. Income
It’s a good idea to have multiple sources of income for your early retirement.The current prediction is that most of us will never see a social security income, and if we do, we won’t be able to receive it until at least age 65. One typical way of creating income is owning a home. As the price value goes up, so will your equity. As mentioned this will allow you to sell your home, but other people choose the route of residential rentals for consistent income. The truth is that many places in the United States don’t have enough housing available, therefore there will always be a need for housing rentals. Another source of income would be starting a side business. Many people find ways to make money off their hobbies, such as landscaping, art, or sales.

5. Understand Your Values
Saving enough money for a retirement can be a lot easier than most people think: the hard part is changing your lifestyle. If you want to retire early in your life, it’s crucial to create a plan that you can stick to. This does mean becoming frugal with your lifestyle choices and decisions, but you will soon be able to realize what your life values are. When you learn how to live a simple life, you’re able to understand the difference between your wants and needs, and can see a different perspective when it comes to your financial choices.