|Committing to your retirement doesn't
have to be complicated or difficult. Now is the perfect time to get started
on your roadmap for retirement success. We're living proof -- we
followed these simple steps 30 years ago, and they worked for us. Here's what we did
in order to retire early.
1. Track spending.
Take a close look at your expenses on a daily basis. Once you start
doing so, you'll be amazed at what you're spending your money on. Businesses
must look at their cash flow in order to stay afloat; why shouldn't you? It
only takes a few minutes a day once you set up your system. After a month or
two, you'll discover where you can reduce your cash outflow. Within a year,
you'll be in control of future spending.
2. Save a lot.
Once you have control of your spending, save that extra money for
your future. If you're younger than 30 years old, a good target is to save
10% of your gross income -- not your take-home pay, but the full amount of
your salary before taxes and other deductions. After a short time, you won't
miss the difference, but
your savings will grow substantially. If you're
over 30, increase your savings rate to 15% or more if possible. Take full
advantage of employer-sponsored plans like 401(k)s, matching contributions,
and any other retirement benefits you receive -- but don't include them in
your savings percentages. That should be on top of what you're already
saving on your own.
3. Invest wisely.
Learn about investments, become your own expert, and keep things
simple. You don't need to impress your friends with financial terms just so
you can look knowledgeable. It's all about your results; if you can't
outperform the S&P 500 Index year after year, take a look at simply matching
it through index investing.
4. Put peer pressure into
Social pressure to spend
can be subtle and pervasive, and it can divert you from your
commitment to retire early. Marketing specialists tell you that
if you only buy this new product, car, house, or membership,
your lifestyle will improve. It's reasonably easy to tune out
that marketing message, but you have to handle your friends with
a little more tact. Trying to match the spending of our peer
group is a surefire way to derail financial goals. Decide now
you don't have to keep up with their consumption to fit
into the crowd. The choice is yours -- not theirs.
5. Keep your eye on the prize.
Set realistic goals and keep to your plan. The amount you save, how
you invest, and when you plan to retire may differ from your colleagues and
others. No one will be as dedicated or determined as you are to reach your
objectives. Put these goals somewhere you'll see them often, to remind you
to keep you on course. Every time you get sidetracked by spending a little
bit more, succumbing to peer pressure, or choosing not to put extra money
into your retirement funds, you're literally delaying your retirement date
by weeks, months, or perhaps even years. Stay focused.
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