Are you dreaming of retiring in your 30’s? Then stick till the end of this article. In this article, we will be talking about whether it is possible or not. Early retirement is the dream for many millennials now. Although you will find many articles on the internet and some of them are even written by people who have done it.
The prospect of early retirement is truly an enticing idea. But how does one accomplish this? F.I.R.E (Financially Independent – Retire Early) is becoming highly popular in the finance community. Although there are mixed opinions surrounding it, its increasing popularity of it is something we should consider. Frankly, anything that makes people more interested in saving is a good thing. Don’t you agree?
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FIRE movement
For all the people confused about FIRE, it is an early retirement movement in which people save aggressively intending to retire in their 30s or 40s. As a part of this movement, one must invest more than 50% of their annual income. If you are not ready for it then you should not even consider it.
The FIRE adheres to the 4% rule. This rule was first developed in 1994 by the financial advisor William Bengen. The crux of this rule is that one should save 25 times their annual expenses (living) but they can withdraw only 4% from their nest egg at the time of retirement. They keep increasing the amount to match the inflation.
Sounds hard, right? Because it is. If you follow FIRE then you have to remember that you will not be following the traditional financial advice. Different types of FIRE follow different lifestyles. People who follow the FIRE movement end up spending frugally and saving more for retirement.
Is this plan feasible?
Well, that completely depends on an individual’s personality. Many factors should be considered such as expenses, salary, previous debts, etc. One thing that you should remember is you will have to make sacrifices in hope of making your retirement worthwhile.
If you are thinking that you cannot handle the FIRE movement completely then you can just take parts of the principle that work for you. Every method of saving has a benefit, right? If you start making savings and then gradually increase the amount you save, even if you are not retiring early you can have enough for your retirement.
If you want to retire early then you should start moving early. Here are a few tips that can help you.
Do not withdraw from your retirement account
When you see a sizable amount in your retirement account you are tempted to withdraw money from the account in case of an emergency. However, you should remember that the purpose of your retirement account is to save for retirement.
So you should not remove it from this account even in case of emergencies. The longer you let the money stay in your account the more potential it has for growth. Patience is the key, don’t touch the money until you retire.
Understand yourself better
Nobody is the same, so our thoughts and opinions on leading our life can also be highly different. Some people want to live their best life now, some after retirement, some both now and retirement. Well, before starting to save or invest for your retirement it is your responsibility to understand yourself, your goals, and your needs.
You must have awareness of yourself and your financial situation before you make a decision you cannot revoke. When you have a clear understanding, you will be more willing to make sacrifices to achieve your goals.
Say “NO” to debt
The most obvious tip on the list. People still need a reminder about it. Saving for your retirement while dealing with debts can be exhausting and tough. One must always take up the burden one can handle.
Any loan you take, be it a long term or short term becomes a hurdle for retirement as it jeopardizes the assets that could be used for it. Paying interest is also a cost that comes with debt. So make sure to avoid taking debts, if you want to have an early retirement.
Multiple sources of incomes
If you are planning to retire early then you cannot just rely on one income to achieve this goal. You need multiple sources of income to save a good amount for the future. Be it investing in purchasing a property and getting rental income from it, or, a side-hustle or a hobby that could bring income.
You need to have multiple income sources to meet your expenses and save for your retirement. Having more income streams means you can carefully plan for all your expenses, and needs and save a huge part of your income.
Always approach a financial advisor
Don’t take all your decisions by yourself. You need expert guidance if you want to achieve your dream of early retirement. Don’t take advice from your acquaintances, because investing is not one size fits all. Just because it worked for them does not mean it will for you too.
Each person’s lifestyle, goals, and income are different, this is why you need a tailor-made plan that works for your situation. An advisor will understand your goals and will provide you with a plan that works for you.
Final Thoughts
Early retirement is a dream for many. But there are only a few who have accomplished this impossible feat. Don’t trust people if they tell you early retirement is easy, because it is not. Everything has its challenges, even early retirement too. So find a pace that works for you and start investing, saving, and keeping the cycle going.
A small step towards saving can also help you in retiring with a good corpus. Start by managing your expenses and saving in government-authorized investment plans. Want to know more about investing and saving? Check out the zeen website.
