From time to time we hear about individuals and couples who seem to have hit the jackpot: not in the literal sense of having won the lottery, but having figured out a way to retire at age 55, or maybe 50, or perhaps even younger than that.
At first glance this might seem too good to be true. After all, many of these early retirees spend their working years at jobs and careers that aren’t particularly high paying. How is it possible that these people can retire after spending fewer years in the workforce than the average worker.
Here are some of their success secrets.
Focus on Spending. The most fundamental aspect of taking control of your finances is to focus on your spending. Too many individuals and couples devote their energies to maximizing the income side of the equation. But the truth is that working up to a higher income level won’t improve your overall financial situation if you simply spend that additional income.
Track Your Expenses. Early retirees consistently advise to always know exactly where your money is going, so that you can adjust your retirement spending levels to meet your goals. This doesn’t necessarily mean that you have to track every penny, but you should try to be fairly close to that level of accuracy.
Live Below Your Means. It’s all too common for workers to find that they are effectively living paycheck to paycheck. And surprisingly, workers at all levels of the economic spectrum (even those at the higher end) find themselves in this type of situation. Make a concerted effort to live below your means so that you have money available to save and invest each month.
Save Consistently. The best way to save for retirement is not to focus on bringing in more income (although that can certainly be a valuable goal). Rather, the key is to consistently live below your means. For example, if your monthly household income is $5,000, then try to make your monthly spending budget significantly less than that; perhaps $3,500. By doing so you can contribute to your retirement savings, investment and emergency fund accounts on a consistent basis.
Save the Bonuses and Raises and Tax Refunds. When you become used to living at a certain income level, don’t automatically ratchet up your spending whenever you get a raise, receive a bonus or get a tax refund. Continue spending at the levels you’re accustomed to and save that additional income – it can get you to your retirement goal more quickly.
Remind Yourself of Why You’re Saving so Hard. One reason that some individuals have such a hard time saving for retirement is that it seems so far away. After all, they might think, why save for something that’s decades away when spending the money now could provide immediate gratification? Combat this mindset by having a well-defined plan for what you want your retirement to look like, and reminding yourself of that frequently.
It can be difficult to plan for your long-term financial health, but by taking some of the above retirement advice to heart you’ll be putting yourself in a strong financial position.
Tags: retire early, retirement advice, retirement planning, saving money
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on Thursday, May 22nd, 2014 at 1:30 pm and is filed under Planning.
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From time to time we hear about individuals and couples who seem to have hit the jackpot: not in the literal sense of having won the lottery, but having figured out a way to retire at age 55, or maybe 50, or perhaps even younger than that.
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