Everyone wants to become a millionaire so they can retire early to follow their dreams. Unfortunately, it takes a lot more planning than you might think, but you can do it with a bit of perseverance and effort.
Do you want to retire early? If so, you’re not alone. Tons of people aim to break the mold of working for 30 years only to retire in old age and bad health. The prospect of retiring early is a growing trend among the younger generations.
By gaining financial independence in your thirties and forties, you can easily retire early. Only then can you follow your dreams and passions of life, maybe even take up a new hobby or two as well. That is the dream, isn’t it?
If you want to retire early, you absolutely must plan accordingly. You can’t just live however you want and expect to have enough saved. Instead, you need to ask yourself three questions well before you plan on retiring:
- What do I want to do after retiring early?
- How can I be financially free after retirement?
- What can I do now to become a millionaire and retire early?
In this article, we are going to walk you through these questions. These three questions can help you determine how much you need to save to retire early and how you can save that money. Let’s jump right in.
Think About The Ultimate Goal
The first question you need to ask yourself is what you want to do after retiring early. For the first time in your hard-working life, you will have a lot of free time to do whatever you want. Chances are, you have never experienced this much freedom before.
From the time you were in kindergarten, you have always been working and hustling to prepare for your life’s next stage. Now that you have retired, you have reached the stage of relaxation and enjoyment, allowing the world to be your oyster.
At first, many retirees find this excess amount of time to be overwhelming. After all, having that much free time is a bit scary and may feel wasteful or overindulgent. However, you can fight some of these thoughts by planning your post-retirement life.
DON’T BE AFRAID TO BE SPECIFIC
When thinking about your early retirement, you need to plan what you intend to do. For example, do you want to travel? Do you want to spend time with your friends and loved ones? Do you want to indulge in a hobby or artistic craft?
Once you decide on what you generally want to do, you need to be more specific. If you plan on traveling, start coming up with travel plans. For instance, create a yearly itinerary of the places you want to go, how long you intend to be there, etc. Do the same thing even if you want to spend time at home or home in on a craft.
It’s essential to be specific. Being vague about your retirement plans makes it difficult to calculate expenses and how much you need to save. Plus, having a concrete plan now makes it more likely that you’ll follow through once you retire.
After you decide what you want to do with your free time and create a specific plan, you can move on to question 2.
Determine How Much You Need
Now that you know what you want to do, you must ask yourself how you can be financially free after retirement. The most general answer is to calculate expected expenses and start saving now. The earlier you start saving, the more money you will have for retirement.
How much money you need for early retirement depends largely on what you want to do. If you want to travel during retirement, you will need to save much more than the person who wants to spend time with loved ones and friends.
Something else you need to factor in is medical conditions. The person with health conditions will need to have more money saved up than the healthy person. Even if the health condition is unfatal, like hearing loss, you need to factor in the cost for services like Clear Captions.
Use Online Calculators
Even though it may sound scary trying to calculate how much you need to save (especially if you are not a math whiz), its calculations are relatively simple. There are many online calculators available that can help you calculate how much you need.
Some of these calculators even account for inflation, which is a huge thing to consider. If you don’t think about inflation, you could easily find yourself with way less money than you anticipated or need for your retirement plans. Here are some calculators we recommend:
In addition to inflation and general savings, you must factor in possible adversaries. You never know when you could find yourself needing to pay off unforeseen accidents or medical bills. Try to save 20% to 25% more than the calculated numbers to account for unexpected expenses. If you expect to work part-time, you won’t need to save that extra money.
The 4% Rule
As you are saving money, try to keep the 4% rule in mind. This rule states that you should expect to withdraw 4% of your entire retirement savings every year. For example, you will need to save $1 million if you expect to spend $40,000 annually.
Because of this rule, you have to become a millionaire if you want to retire early. If these numbers are scary to you, try a service like farther to make wealth management a bit easier.
Now.. How To Be Rich, And Retire Early?
If you want to retire early, you must become a millionaire, which is easier said than done. However, the feat is possible if you put in work now. Here are some things you can do now to help you retire early:
1. Create A Plan
As we have already touched on, planning for retirement is essential. You won’t become a millionaire by coasting by. You need to have a financial plan that directs action and actively turns your dreams into a reality by guiding you to make smart decisions.
You can enhance your plan further by focusing on your top income sources, budgeting your expenses, and cutting down on items you don’t need. Spending trackers and budgeting apps like EveryDollar can go a long way in helping you reach your goal of retiring early.
2. Tackle Debt First
Debt is one of the biggest contributors to late retirement because it weakens your income. Instead of letting your debt get out of hand, start tackling it now. Start by creating a list of all your debts and prioritize them in order of payments.
There are tons of ways you can prioritize and pay off your debt. One of the best methods is the snow ball method, which is when you start by paying off the smallest debt and work your way up as you pay off items. The sooner you tackle your debt, the sooner you can start saving for retirement.
3. Start A Side Hustle
Saving is much easier whenever you make more money. Try investing or taking up a side hustle to make more money on the side. You can maximize your earning potential by taking paid surveys, freelancing, or starting a blog. You can learn how to make a lucrative blog with this starting guide.
If you want to try earning more through side hustles, we recommend these resources:
- 8 Must-have Free Money-saving Apps To Try
- 9 Trending Blog Post Ideas For 2021 (+ Free Tools)
- Make Money Blogging: Here Is How To Make Your First $1
4. Invest and Save
Invest your money so that it compounds over time. Compounding interest is one of the most significant ways to hit a 7-figure net worth so that you can retire early. Start early for the best results. Apps like Stash or Coinsmart let you make the most of compounding interest with minimal starting costs (as low as $1!).
5. Use Apps To Save On Your Purchases
Instead of saving when you feel like it, automate your savings. This ensures that you save as much as possible. You can even use apps like Ebates or Trim to automatically save when shopping too. Automatically saving from all fronts will make a huge difference.
6. Start Living More Healthily
This may sound like a weird tip for retiring early, but start living more healthily now so that you have fewer medical bills in the future. Exercise regularly and eat right. Doing those two little things can save you a whole lot of money down the road.
7. Keep Learning
Education is the secret to success in just about everything, including retiring early. Learn more skills related to savings, your job, or retirement to build up your net worth for retirement. You can educate and invest in yourself by using online resources like training.co.
8. Think About Retirement Jobs
Just because you are retired does not mean you don’t work at all. Retirement is the perfect opportunity to take on part time jobs that fulfill your interests and passions. Think about potential retirement jobs so that you can make a little bit of money without stressing yourself out.
For example, consider working part time at a used bookstore if you love reading and writing. That will allow you to be in an environment you love while still making a bit of extra spending and living cash on the side.
9. Save More Than You Spend
The most important way to become a millionaire who can retire early is to live below your means. As shocking as it may be, the wealthiest people worldwide are all frugal and live below their means. Whenever your income increases, don’t increase your spending. Instead, save that extra money and put it towards retiring early.
Although the road to retiring early can be a bit bumpy and intimidating, it’s a journey well worth the effort. By following these tips and asking yourself these three questions, you can become a millionaire, allowing you to live financially free and retire early. Other people have successfully retired early. Why can’t you?