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Planning to retire early?
The good news is you are not alone, there is an increase in your like-minded people now days planning to retire early.
More and more people are learning how to retire early every day. People are ditching the traditional ways of doing things where you have to work for 30 years and retire by 60.
So here you go, if you are planning to retire early then there are two most important things you need to think about
- What to do after retirement?
- Financial freedom after retirement
What to Do After Retiring Early
After quitting your job you will have plenty of time in hand.
You have no first-hand experience of such an amount of free time.
You have been doing hustling all your life to reach this stage and while doing so you have gotten used to be always busy.
When you will get so much free time you might be overwhelmed. That is why it is most important to be clear on why you want to retire early.
What will you do with this independence?
You have to create a plan for your future. You want to pursue your hobby of music or painting or travel, whatever it is.
Don’t keep it vague.
make it specific like maybe you want to go to a particular destination or join some music course.
At least for the first one year have a concrete plan of action because that is the toughest past, later you can figure out on the way.
Calculate Your Numbers
So you have decided on what you want to do after retirement. It’s time to calculate your numbers. Based on things you decided to do after retirement your numbers will vary.
If you want to just have a frugal life and spend time with your family then you will need less.
But if you want to travel the world you will need a higher corpus to sustain you. Based on your medical conditions spendings can vary, like if you have hearing loss, you may need services like Clear captions.
There are calculators available for calculating the amount you need. They have options to account for the inflation, which is going to be the biggest enemy of your corpus.
Whatever amount it comes out to be, you need to accommodate for the adversaries.
Unless you have some passive source of income or you intend to do some part-time work, aim for at least 20-25% higher than calculated numbers. These are the calculators you can check out.
For retiring early, the fewer expenses you have, the better it is. You need to pay off your debts and reduce your bills.
The general rule of thumb in this field is a 4% rule where you need to save the amount from where you can withdraw 4% annually. Like your annual expense will be 40,000 then you need to save 1 million.
More Conservative is 3% so if your annual need will be 40,000 then you need a sum of 1,333,000.
So essentially you have to become a millionaire if not multi-millionaire before retiring early and creating passive source of income is a bonus.
Trying services like farther are highly recommended for wealth management if you feel overwhelmed by all the numbers.
How to Become a Millionaire
Becoming a millionaire is a goal that is achievable. You just need a plan of action and focus to work on it. Soon your worth will be in seven figures.
1. Write Down a Plan
The first requisite for becoming a millionaire is to have a plan of action. A financial plan forces you to take action, instead of just imagining post-retirement dreams.
It also guides you in making the right decisions in order to achieve all of your dreams and goals.
Track your expenses, you can use spending trackers and budgeting apps like You Need a Budget and Personal Capital.
You already know how much amount you need so plan such that you
- Focus on important income sources.
- Focus on what you can control by listing your expenses first in your budget.
- Cut down expenses you don’t really need like your mortgage is hurting then plan to downsize.
2. Increasing Your Income
You have several options to boost your revenue, like investing in high ROI businesses and side hustling.
Try to maximize your earning potential. Do things which increase your income, like paid surveys in free time. These things can generate income for your day to day expenses and your main salary you can save for your retirement.
Increase your steam of income. Write a book if you are an expert in something, start a blog.
See this step by step guide to start a blog that can create a passive income source for you. They pay you even when you are not working.
Want to Earn More, Try These Resources:
3. Take Advantage of Compounding Interest
If you are giving your money more time to compound and keeping your rate of return as high as possible then you are greatly increasing your chances of reaching a seven-figure net worth.
And more early you start this works, the more it is in your favour.
So start investing early, don’t think about the amount think about a long time.
4. Automate Your Savings
Manually managing your savings and investments can lead to faults or ignorance.
To get the best results it is recommended to automate your savings. This will automatically withdraw a percentage of your salary and place it into your contributions without your ever seeing it.
5. Learn More and More
Learning is the best investment you can do, that’s why always invest in yourself and keep updating yourself.
Learn new things that will help you earn more. Or learn new skills in your current job which will increase your value and earning potential.
Educate yourself and invest in courses that increase your value using online academies like training.co.
Read books and always keep updated, it will keep your sharper.
Bonus point is learning new things keep to motivated in your life, it give purpose to life.
6. Live Below your Means to Retire Early
Last but not least, have you seen Bill Gates or Mark Zuckerberg or Warren Buffett. Wealthiest people in the world are frugal. They don’t spend excessively on designer and luxury items.
So when your income increase, don’t increase your spending proportionally. Save for your retirement and cut off the extra expenses to reach your goal fast.
If you follow and adapt to these basic but important things then you will be on your way to becoming a millionaire and then to your financial freedom.
You will have bumpy rides along the way for sure but if you are determined and your goals are clear you will reach the other shore of the river. Many people have already done it so why can’t you.