How to Retire Early in 5 Steps
While many often daydream about retiring early, they do not necessarily want to work hard to achieve it. Early retirement is definitely not easy but it sure is a simple enough goal for someone to achieve if they are hardworking and self-disciplined. That being said, in this article, we are going to discuss five essential steps that you can take to retire early. Let’s get started.
Try to Define What Early Retirement Means to You
Early retirement seldom means the same thing to everyone. Many people believe that it only means that you’d never receive a paycheck again but that is quite untrue unless that is exactly what you are looking for. For many early retirees, it also means to just be financially independent by leaving your corporate job to focus on something creative that you have always wanted to do. Therefore, the first step for you to retire early is figuring out what exactly you want out of your life when you think of early retirement.
Start Taking Inventory
This is the second most crucial step when it comes to retiring early. Consider calculating your net worth as of right now, and after that, do the same with your annual spending. When you have completed these two tasks, you will know which are the areas that you need to work on to make your dream of early retirement a reality.
Try to Determine Your Target Number
Now that you have outlined your version of what early retirement means and taken inventory of your present financial situation, you need to establish how much money you will be needing to successfully retire early.
According to Grant Sabatier who is a self-made millionaire and an early retiree in his book ‘Financial Freedom: A Proven Path to All the Money You Will Ever Need’, wrote that people should consider having anywhere between 25 to 30 times of the expected annual expenses saved up or invested along with a year’s worth of expenses completely in cash for emergencies. Now you can obviously come up with your own version of the target number that you need to retire early. Just make sure to take into account everything that could possibly go wrong as well within your equation.
Start Living Frugally
This is again a very important step to retiring early. You have to make sure that you are living below your means. If you are spending more than what you earn, then it will be very difficult for you to long term wealth. Living frugally will ensure that you are saving up and investing very aggressively. To do this, first consider reducing your biggest unnecessary expenses and then slowly work your way down from thereon.
Learn How to Leverage Your Income
You have to learn how to leverage your income. If you want to retire early, there is a certain limit to what you can consider cutting costs. Therefore, if you are really serious about this goal. Then you can start thinking about side hustle opportunities to bring in more cash, which could completely go into your early retirement fund.