Many of us want to retire early. That early retirement age might be 35, 40, or 50, but the idea is to retire sometime before the age of 65 and start enjoying life — before age and infirmity catch up with you.
The reality, though, is that the dream of early retirement will remain a dream unless you take action. Here are 5 steps you can follow to help you reach your goals of early retirement:
1. Make Early Retirement a Priority
You say you want to retire early, but have you made the necessary commitment? Look at the way you use your financial resources. What do your actions say about your financial priorities? If you really want to retire early, you have to make it a priority — and you might have to make tradeoffs. That means that you have to give up less important things in the present in order to achieve your long-term priority of early retirement.
2. Be Realistic in Your Expectations
Next, you need to look at your financial situation realistically. If you’re 35, have no savings plan, and $10,000 in your retirement account, you are going to have to make some very big changes in order to retire by age 50. Look at realistic investment returns (not the 10% predictions that many tout for stocks), and plan for conservative returns. Be realistic about what it will take to meet your early retirement goal. Any plan you make must be based in reality.
3. Create a Plan
Armed with the willingness to commit and realistic expectations, it’s time to create a plan. Your early retirement plan should help you save enough money each month to reach your retirement goals. This means that you have to consider cutting your expenses, and changing what you do with your money in order to meet the requirements of your plan. And don’t forget about having an investment strategy as well. Investing is the only way to build up enough wealth to retire early and comfortably.
4. Make Your Plan Work
You need to put effort into making your plan work. This might mean cutting unnecessary expenses from your budget. It might mean spending less, hoarding your money until you reach your goals. It’s true, trying to retire early can mean sacrifice now.
Another way to make your plan work is to increase the amount of money you make. If you know you won’t make your goal of early retirement in 20 years and you just can’t cut anymore, try to earn more money. Improve your marketability so that you qualify for a pay raise. Start a side hustle. Look for ways to increase your income so that you can put more money toward making your early retirement plan work.
5. Don’t Forget Diversity
Don’t forget diversity as you invest and adhere to your plan. You need the right asset allocation to see retirement portfolio success. It can also help to build diverse sources of income that can help you weather various storms before and during the retirement years. With the right income sources and asset allocation, you can get through setbacks without putting your early retirement goal at risk.