How much time do you spend each day looking for ways to save money? Are you tired of spending hours searching for the best deals? If you want to retire early, then you should start saving now. The earlier you start, the better off you'll be.
In order to achieve financial independence, you need to build a solid retirement plan. This means that you need to put aside some money every month. It might seem impossible at first, but once you get started, it won't take long before you see the benefits.
If you want to quickly estimate when you can retire, then try out our handy Retire Early Calculator where you can input your annual income, annual expenses and your savings rate to get an estimate of your current situation.
Here are some tips to help you create a budget and stick to it.
1. Save Money.
If you are wanting to progress to that goal of financial independence then you need to start saving money. Whether that is into an investment account or a retirement account, the main thing is that you start. If you have not been saving any money for retirement so far then don't worry, it isn't the end of the world.
However, the faster you get started putting some money aside for the retirement you desire, the faster you will actually get to your goal of retiring. You may even be able to retire early and make your retirement age get closer and closer.
2. Live Within Your Means.
Of course it is easier said then done to save, but you will only be able to save if you have enough disposable income to actually save for that early retirement. It serves no good having retirement accounts if you cant contribute to them in any meaningful way.
The most important thing you can do to help yourself live within your means is to set up a budget. You need to figure out how much money you're making right now and what your expenses are. Once you have this information, you can determine where your money goes. Then, you can decide whether or not you want to cut back on certain things.
We have a blog post on our favourite apps to help you begin budgeting:
3. Pay Off Debt.
If you have credit card debt, pay it off as quickly as possible. If you have student loan debt, consider consolidating them into one monthly payment. The most important thing is that you begin tackling any high interest rate debt immediately.
There is no point in beginning to save or invest your money when you still have a lot of high-interest debt eating away at your savings. Work your way down from high interest to lower interest debts and then begin investing for the future.
4. Start Investing Now!
You don't have to wait until you're retired to begin saving money. In fact, starting sooner will ensure that you have enough money saved when you actually retire. Time is our biggest friend when it comes to investing for the future. Our blog on Compound Interest goes into more detail on how powerful starting early can be.
5. Invest in Yourself.
Investing in yourself doesn't just mean investing in the stock market or real estate. Instead, think about investing in things that will improve your life now and in the future. For instance, enroll in courses on personal finance so that you can learn more about managing your finances. Or, look into getting a degree in something that will earn you a steady income later in life.
6. Learn How To Cook.
Cooking healthy meals at home takes less time than ordering food from restaurants. Plus, cooking delicious dishes makes you feel good about yourself. And most importantly, cooking your own food can massively save money.
This is the only area we are specifically saying you could cut back on as most peoples disposable income seems to go into eating takeaway. Of course there are many other benefits so, why not invest in learning how to cook? There are many great books available that teach people how to prepare simple recipes which are fast to make.
Checkout this Mediterranean Meal Prep guide which can help you better prepare meals in advance, saving you time and money.
7. Increase Your Income
This may be a pretty obvious one but it is important to understand that saving isn't always viable. Sometimes you have to increase your income to have a chance of saving enough for an early retirement or even just to retire by the normal retirement age.
There are many ways you can increase your income. The most obvious would be by getting a part-time job or starting a side-hustle. For a good idea of some side hustles check out our list of our Best Side Hustles to start in 2022
8. Learn A New Skill.
Learning new skills is fun and rewarding. Whether you decide to learn how to play guitar, paint, write code, or anything else, you'll enjoy the process. Once you have gained a new skill you can then work on monetising it to create more income towards a faster retirement.
You can create courses, teach people one-on-one or even start your own blog to help people learn what you have learned. You don't have to be an expert in the field an more often than not you will learn faster by jumping into teaching as fast as possible. Remember, if you provide value to other people, then money can be made.
Pushing for An Early Retirement
If you really want to push for an early retirement then you need to take action. Start making changes today. It's never too late to start planning for your retirement. If you've been putting off saving because you don't know where to start, then this post has hopefully given you some useful ideas of where to start.
If you want a bit more detail on the FIRE movement (Financial Independence Retire Early) then be sure to check out some of our other blog posts including our introduction into FIRE:
Summary
So, there you have it! These are all the steps you need to take to get closer to hitting your retirement goals and retiring earlier. We hope these tips helped you achieve your goals.
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Thanks for Reading 😊
FAQ
How to retire early: the Fire method
Fancy retiring in your forties or even your thirties? Millions of people are following the formula of an extreme saving and investment movement known as Financial Independence, Retire Early (Fire). (thetimes.co.uk)
How might my income needs change over time?
This is another key point to consider. Early in your retirement you may want to spend more, enjoying your freedom, travelling and treating yourself. Later on you may settle down and begin to spend less – but later still there may be a need for expensive long-term care . These changing requirements may influence how you decide to take your pension. (unbiased.co.uk)
What's the 4% rule?
4% rule is an investing concept used to determine how much a person can safely withdraw from their retirement account every year. It is based on a paper known as the Trinity Study, which first appeared in the Journal of the American Association of Individual Investors in 1998.
The Trinity Study shows that by withdrawing 4% from your investment accounts each year, the amounts you withdraw should only consist of interest and dividends. This allows your account balance to remain steady throughout your retirement - even if you retire early. (mileiq.com)
How can I work out how much money I need to retire?
Using the 4% rule previously mentioned you can estimate your required funds to retire indefinetly. To do this simply times your desired annual income by 25x. This 25x comes from 4% fitting into 100% 25 times. For example, if you wanted to retire on £20,000 per year, then you would need to amass £20,000 x 25 which equals £500,000