We all dream about spending our evenings by the sea shore with our loved ones without having to worry about tomorrow. Similarly we also aspire for a life where our financial troubles are beyond us and we can peacefully retire from hectic work-life. By default most people retire at 60, but with sensible planning and some degree of financial discipline it’s possible to retire much earlier say by the age of 50. Through this write-up, I want to highlight simple steps to help you realise this dream.
Save early – Don’t Procrastinate
Warren Buffet who is ranked as the third wealthiest person in the world, attributed his financial success to value investing coupled with an early start. We should not wait for a bumper package or windfall gains to start investing, instead a small saving done on a day to day basis can compound itself into a substantial sum on hand over a period of time. Every day you delay is another day where opportunity is thrown away. Many people procrastinate because they feel uncomfortable and out of place making financial decisions. Get over it! Nobody is born a financial genius. Just get started and fumble through it. Silly mistakes are better than doing nothing at all.
Budget Yourself
I don’t say it’s easy to retire early because you will now have make some tough decisions with regards to your spending habits. One of the quickest ways to become rich is to live a frugal lifestyle. Instead of living beyond your means, buying things on credit that you can’t immediately payback- live below your means. Buy a used car instead of a new one, buy a 21 inch TV even if you can afford 41. The problem is you will never become rich by spending money. You must control your spending so that your lifestyle lags behind your income. This will create available capital for your investment activities.
Generate alternate sources of income
On an average every individual manages to utilise only 60% of his potential to what otherwise he or she is capable of. That means there is always a waste of potential talent mainly due to its non-utilisation. If you plan to earn an equivalent sum of money within a lesser time as opposed to what it would normally take to earn it, you will then need to use your under-utilised time and talent in ways such that they can contribute to earn an additional income. Try to look out for ways to have alternate sources of income by taking up vocations like freelancing or consulting jobs. This will not only make use of your full potential but also help pay bills and have greater savings.
Make your money hard to reach
Once you manage to save, resist the temptation to withdraw from it. Your car breaks and you use your savings to buy a new one. You get laid off and use your savings to carry you through until the perfect job arrives. Life throws you curve balls, and savings without barriers to protect them are an easy target for solution.The rule is simple: when you build a nest egg, don’t raid it. Never borrow money from it for current lifestyle and don’t spend a penny from it until after you retire. Just let it grow and grow until you are financially free. This is easy to understand but hard to live by.
There’s more to retirement planning than just money. What about relationships? What about your health? What activities engage your interest? Happy retirees have fulfilling lives with the health and money to enjoy them. Make sure you have plenty to live for when your work no longer fills your days, and make sure you take care of your health so that you have the energy and vitality to pursue whatever brings you joy.
