When it comes to knowing how to retire early, the process is both simple and complicated. It is simple for those who understand how to do it and are ready to put in the effort and discipline to have enough to retire early. But the process is complicated for those who have no such understanding.
Have you realized how easily some people make millions? Have you also realized how challenging it is for some to make a living? This is the reality everywhere around the globe.
In many countries, the normal retirement age is between 60 and 65. At this age, a person has worked for 40 years or probably more. Many people work for 40 years with a decent salary but end up depending on social security for survival after retirement.
This shows that having a decent job with good benefits is not enough to retire comfortably, let alone retiring early. Is a good job a solution? If not, then what is?
This article will not only teach you how to retire early but also how to retire early and rich. If you start following the steps in this article, you can retire in 10-15 years as a millionaire.
4 Things To Remember If You Want to Retire Early
To retire early, you have to make enough money to guarantee a decent living after retirement. This has to be done early. The process is simple:
- Earn more money.
- Spend wisely.
- Save and invest wisely.
However, before we look at the process, we must keep in mind the following important points:
1. Set Your Retirement Goals
Setting goals is the first step to any major achievement. They show you the way and help you know when you get there.
These retirement goals should answer the following critical questions:
- What is retirement to me? This can be not working again, leaving formal employment and starting your own business, or just doing what you are passionate about.
- When do I want to retire? Do you want to retire at 20, 30, 40, or 50? This will help you evaluate the amount of time you have to achieve your goal.
- How much should I have at retirement? What net worth do you want to have at retirement? How much income should your assets bring you every month after retirement?
- What kind of lifestyle do I want to have after retirement? Some people want to retire and travel the world. Others want to retire and just spend time with family. The lifestyle you want to have after retirement should dictate how you live today.
2. Understand Where You Are Today
When heading to a certain destination, you have to understand where you are currently to know the shortest and most convenient route to take to that destination. This calls for an honest evaluation of your current circumstances. Do a thorough life audit to get this understanding.
3. Evaluate Your Options
After setting your retirement goals and understanding where you are currently, you need to evaluate the options. You can start a business, get a better job, invest in real estate, get a financial advisor, and all that.
4. Know the Way Forward
What options will I take? After understanding all the options available, you need to choose an option or a combination of options. These options will guide your actions moving forward.
After answering these questions, there are specific actions that will help you retire early. We will divide them into the three major steps we pointed out earlier. These are: earn more, spend wisely, and invest prudently.
Earn More Money
This is inevitable. To retire early, you have to earn more than the average person. This will enable you to invest more and get financial freedom faster.
Earning more money is not easy. If it were easy, everyone would be doing it. After all, everybody wants more. You need financial education, effort, and discipline to make more than you are making today.
As we pointed out, your lifestyle after retirement should guide your actions.
1. How to Retire Early to Rest
If you want to retire early and spend time with family or rest, there are several steps that you can take to earn more. These steps will give you enough to pay for your bills after retirement.
They include the following:
- Get a second job. For those who are employed, a second job can increase your income at the end of the month. You can then live off one income. This will give you more investment capital to push you to your retirement goals. I have an employee who works for me during the day and then takes other jobs at night.
- Get a better job. You can a job with better remuneration if you want to make more money. However, you need to increase your level of education and specialization.
- Renegotiate your current remuneration terms. You do not need a better job if you can make the current one better. Renegotiate the terms with your employer to make more every month.
- Start a side hustle. A side hustle will bring extra dollars at the end of the day. This can be a small business that you run in the evening and during the weekends. You can also employ someone to run it on your behalf.
2. How to Retire Early as a Millionaire
If you want to retire early as a millionaire and travel the world, you need to take a different path.
Here are the following things you should do:
- Start a scalable business. To become a millionaire, your business has to serve thousands of people. Here, the business idea should be working. The business should have working systems that can run even without you having to work every day.
- Use other people’s time. People who retire early understand how to leverage other people’s time to make more money. Successful people give money to buy time while average people use the time to get money. This is the difference. This is why the richest people have thousands of employees in their companies.
- Use other people’s money. To get more money, you need to invest more. In this case, you need to know how to utilize debt to your advantage. Debt is a catalyst for financial growth. It is also important to be cautious because debt can be a catalyst for financial distress and disaster.
- Work smart. To retire early as a millionaire, you cannot just work hard, you need to work smart. Working smart means achieving more with less. Get more by investing less time, effort, and resources. It can also mean earning without having to work.
It does not matter how much you earn if you cannot spend it wisely. To retire early and retire rich, you have to spend little as you can and invest the rest.
The following actions can help you spend less:
- Track your spending. Record everything you purchase in a book and do the math at the end of the month. Consider whether what you bought is adding value to you or it was just an unnecessary expense.
- Only purchase what is necessary. To retire early, you only need to spend on what is needed, not what you want. Is it a need or a want? A need is something you cannot do without. A want is something you desire but is not necessary. Only buy needs.
- Sell your greatest liabilities. Liabilities take money from your pocket. They reduce your economic value. To spend less, you need to dispose of your greatest liabilities. If you have several SUVs, you can dispose of them and purchase a fuel-efficient car. This will save you money every day.
- Avoid consumer debt. Consumer debt will ruin your financial future. You will incur unnecessary interest payments without making anything from the debt. As Robert Kiyosaki says, when you take a loan, do not pay for it. Let others pay for it. This means that you have to invest the debt and use the profits from your customers to repay the debt.
- Live your life. One of the best ways to avoid unnecessary expenses is to live your life. Avoid unnecessary influence to upgrade your lifestyle. Do not keep up with the johnnies.
To retire as a millionaire, you have to spend as little as 10% of your income. However, to retire early with just enough to spend, you can follow the 50-30-20 rule.
The rule says that you should allocate 50% of your income to your needs. This includes paying your most necessary bills like rent, food, school fees, taxes, etc. Also, invest 30% of your income on wants. These are things that increase your standard of living but they are not necessary. They include cars, a bigger house, a vacation, etc. Then, invest at least 20% of your income on investment. This is the bare minimum.
You cannot retire early and rich without becoming an investor. It is the investment that multiplies what you have into what you want to have.
Investment is a risky area because money can easily go down the drain. This is why most people fear even the term itself.
To invest prudently, the following are important:
- Get financial and investment intelligence. This is what most people lack. They cannot distinguish between a good investment and a bad one. This is why they find it easy to play it safe and keep what they have as is.
- Take calculated risks. This means that you do not just throw your money ignorantly into a project. You have to do your due diligence and gather as much intelligence as you can.
- Overcome fear. Fear is common in all of us. However, successful investors overcome it. The rest allow it to stop them from doing what they have to do.
- Overcome greed. A good investor is ambitious but not greedy. It is greed that causes the average person to lose money. As they rush desire quick returns, they lose everything. As Warren Buffet says, a good investor is cautious when others are greedy.
If you want to retire early and rich, you will need to come out of your comfort one. You will need to get knowledge, change your attitude, take risks, make moves, and become your best version.
As I pointed out, if it were easy, everyone would do it.
More Tips on How to Retire Early
- 6 Things You Need To Do If You Want To Retire Early
- How to Invest and Make Money for Your Early Retirement in 3 Ways
- 17 Practical Money Skills that Will Set You Up for Early Retirement
Original source: https://www.lifehack.org/893507/how-to-retire-early