Early retirement may seem like some mythical beast you can’t quite see or tame, and financial independence in retirement may seem like a plain old illusion. However, neither of these has to be the case. Read on to learn the real meaning of early retirement, and how long it will really take you to be financially independent for retirement.
There are 3 common retirement misconceptions that greatly impact the idea of early retirement:
- Retirement doesn’t mean “old.” While retirement does traditionally apply to those ages 65 and up, modern retirement is really available to almost anyone. “Early retirement”, these days, should just be called “retirement.” In fact, so many people are retiring in their 30s or 40s that it might become the norm. Want to learn more about how to retire early from someone that did it in real life? Check Joe Dominguez’s book Your Money or Your Life.
- Early retirement doesn’t mean never working again. And no, retirement isn’t for lazy people. Early retirement has such a negative connotation that people have started referring to it as financial independence. Financial independence means getting to do what you love without worrying about money. Achieve financial independence, retire early and write a book, act on the stage, start a travel blog, or whatever else your heart desires
- Early retirement isn’t just for rich people. Anyone can reach financial independence with the right kind and amount of planning, working and saving.
Now that we’ve established what financial independence (or early retirement) really means, now we can talk about how to get it for yourself.
- Spend Less – If you’re not making tons of money, you can still have enough to save for an early retirement by spending less. The less money you spend today, the more money you’ll have to enjoy tomorrow. Think about it: if you spend 100% of the money you make, you’ll never retire. However, if you only spend 50% of what you make, you can retire in 17 years. That’s not that long.
- Do Some Math – Decide when you’d ideally like to retire, and work backwards using your personal finances. Calculate how much money you want in retirement (use an online tool), and determine what percentage of your current income you need to save in order to reach that goal.
- Make Some Cuts – Once you have a percentage you need to save, figure out if you’re on track. If not, make some spending cuts. Get rid of unnecessary expenses like smoking, drinking, eating out, and surplus entertainment. You can easily add an extra $5,000 to your yearly savings by getting rid of these alone. Need more ideas? Check out articles like this one for inspiration. The harder you work, less you spend and more you save now, the sooner you’ll be able to reach financial independence and enjoy your early retirement.
Early retirement is synonymous with financial independence, and is easily achievable for everyone.
Were you guilty of any of these retirement misconceptions? How are you changing your lifestyle to reach financial independence? Share in the comments section, and keep an eye out for more helpful articles.