Traditionally, we think of retirement as being a goal to reach by the time you’re 65. For an increasing number of Americans, true retirement seems more and more like an impossibility. Between wage stagnation and a deep debt crisis, it seems like you’ll never be able to save enough for the next year, let alone find the resources to invest in the rest of your life.
That said, early retirement isn’t out of the question. I’ve known many investors who retire long before the magic number. They’re doing something right, but it’s no real secret. I find we like to think these things are a lot more difficult than they really are.
Retiring young, even if you’re past the ability to retire by thirty, is still possible. You just have to utilize the right strategies to get there.
4 Keys Steps in Achieving an Early Retirement
1) Find sources of passive income.
For most of us, we think of the ability to retire as having enough money to stop working. You can live off of your savings. This model doesn’t really work in the modern world. While savings are great, you never know how long you’ll live or what financial burdens will come your way. Studies show that most Americans don’t even have retirement savings, and the ones that do are nowhere close to the minimum suggested amount.
We can’t afford to overlook the power in passive income. If you can keep earning money into retirement — earning income without working — then you have a lot more security in your retirement. The earlier you can start creating these streams of income for yourself, the better.
Naturally, I recommend turnkey real estate (you can check out our family company, Memphis Invest, here). Turnkey real estate allows people to invest in real estate and earn passive income without taking on the tedious day-to-day tasks that come with rental properties. Instead, you focus on growing your portfolio.
2) Live below your means.
People really don’t like this one. It’s important to recognize that building wealth demands sacrifice. For many of us, we’re too comfortable to live beyond our means. We max out credit cards and take on unnecessary debts and burdens to sustain a lifestyle that isn’t really ours. Even if you can afford it, there’s no reason you have to maximize your cost of living.
A key quality in those who retire early is this level of self-control and intentional living that allows you to maximize not your lifestyle, but your savings.
3) Start by saving something.
I understand. I do — for some of us, the idea of saving money with any measure of consistency seems out-of-reach. We’re fighting wage stagnation, mountains of debt, and higher and higher costs of living and doing business. The key is not to save twenty percent, fifty percent, or ten percent of your paycheck each month — but start with saving something.
If you feel that saving is beyond your reach, sit down and really look at your expenses. Subscription services, grocery bills, dining out, travel and lodging...we often have more frivolous expenses than we realize. Cutting out some of the fat from your budget can free up room to save. Even if it’s a little, these short-term sacrifices make long-term gains.
4) Eliminate obstacles to wealth-building.
I understand that we all face obstacles to wealth-building. For many, it’s student debt. It’s credit cards. It’s an overbearing mortgage payment. This is where we need to re-examine our strategies. Is your market suffocating you with a high cost of living? It might be time to move or downsize. If you’re stuck with debts, set out with an intentional plan to eliminate that debt as soon as possible.
Make principal payments to reduce your interest costs in the long-term. Switch to a bi-weekly payment schedule rather than a monthly schedule. Check out these tips on paying off debts early from the Motley Fool. You’ll find that their pointers apply to many kinds of debts.
In order to build wealth that we can use to invest and realize an early retirement, we have to, above all, be intentional. Too many people wait to start thinking about retirement. The sooner you begin working towards it, the sooner you will achieve it.
What’s your savings strategy? Share your pointers in the comments.