Charting Your Path to Early Retirement

Family in Boat

When you get to a point where you can afford all of the things that you value most without having to struggle financially, then know that you are ready for an early retirement. Essentially, early retirement is not linked to a specific age; rather it is a status of financial freedom and independence. All of us aim at this state of being financially secure and being able to afford to live the life of our choice; and the earlier you get there, the better it will be since you will be able to enjoy that quality life for much longer. To attain this ultimate goal in life though you will need to plan and execute your plan with a lot of patience and discipline for you to be successful.

First you will need to change your mindset about money. More money does not always translate to high quality of life. You will need to understand this basic principle of life in order for you to be psychologically prepared for the transformation you will need to have in your lifestyle as you prepared to retire early.

The fundamental skill that people who have managed to retire early successfully have in common is being able to live frugally for a smaller number of years in order to afford to live comfortably and happily for the rest of their lives. You will need to start tracking each and every expense that you incur daily and cutting down on all unnecessary or avoidable costs. You will also be surviving on the very basic needs of life to ensure that you are saving as much money as possible within your set period of time. All the money you do not spend should then be allocated to savings plan or investments to start generating additional wealth immediately. If you have small children this might be a little bit hard for them but you will need to teach them the discipline of saving and investing until it becomes second nature to them.

Couple Sitting on Boardwalk

When choosing your savings and investment strategies, you will have to consider options that give you the highest returns over the shortest period of time so that you build up your wealth much faster in preparation for the early retirement. Sometimes your savings might not be big enough based on the lucrative investment opportunities presenting themselves to you. In such cases you will need to find a loan provider who will give you the extra cash you need to invest; but the interest rate on the loan must be lower than the rate of return you will be getting from your investment. This will help you to capitalize on the power of leverage to build your wealth much faster and get out of the rat race sooner.

As you build your wealth through investing your savings, you will also need to consider putting in place an insurance plan for yourself and your family. Remember when you retire early, you will not be benefiting from the insurance covers provide by employers for their staff members. You therefore need to have an independent insurance plan and be saving every month towards the same. Among the most important insurance covers you need to have is health insurance and property insurance. With your health and home secured, you can be able to navigate through any financial storm that you might face along the way.

Having said earlier on that you can get a loan to invest in lucrative investment options; it is important to note that any other unnecessary debt that is not being utilized in investment should be avoided. If you still have existing student loans, credit card loans and mortgages, ensure they are a priority in being settled the soonest you can, so that you can free up your money to grow your savings and investments.

Couple on the Beach at Sunset

Another important thing to consider is increasing your income sources. You can do several part time jobs, open an account and start online trading, start blogging and earn money from advertising, write a book and sell it online, be a freelance consultant or start your own small business in your area of expertise. The secret here is to do something that you love and grow it over time such that by the time you are officially retiring early, it will have become a big revenue earner for you to carry it on into your early retirement comfortably.

In a summary, early retirement calls for a lot of sacrifice in terms of cutting down on luxuries and living a frugal life, paying off your debts, saving and investing as much money as you can and finally increasing your income sources by doing things you love most. The application of the above guidelines will differ from one person to the next, but the underlying fundamentals will always remain the same.

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