By Shawn Stevenson
Many people dream of early retirement. Being finished with the workforce years ahead of your peers produces an earned feeling of satisfaction. However, if you want to retire early you need to plan early and often as well. Here are ten early retirement preparation tips:
Make a plan for early retirement
Every achievable goal begins with a well thought out plan. Draft a flowchart to plan early retirement. It’s not necessary for people who successfully retire early to make great amount of money, but being low on funds may call for creative thinking. The most important thing is to decide what you will need to successfully retire early.
When putting your plan together be sure to list all possible future expenses. Things like medical bills, home repairs, travel expenses, and home health care support or respite care, in your later years may be a few decades down the road. However, it’s important to understand what the future may have in store and plan for these expenses accordingly.
Get professional advice
Take professional advice from a financial consultant. A decent professional consultant will review your situation and charge between $200 and $300 for putting together a general plan on how to achieve your targets. No matter how great of a financial planner you are, it’s always better to take professional advice.
Make a budget and follow it
After making a basic plan, and getting professional advice, the nest step is to make a budget. Create a budget which can be easily followed and stick to it firmly. Having a budget in hand will be a great help towards achieving the goal of early retirement. Make use of apps like You Need A Budget (YNAB), Mint, or Mvelopes to keep yourself in line and track your expenses.
At any level of income it is very important to avoid piling up debts. If you do have a few that were unavoidable, clearing off debts is crucially important to living an early retirement life. Not only Budget your finances to clear all your debts in the shortest time possible. Killing debt should include paying off credit cards, medical bills, student loans, car payments, and mortgages. These payments should be considered prerequisites in any budget.
If you need help coming up with a game plan there are free tools, like Zilchworks’ free calculators and sample budget sheets, that can help you visualize how fast you can pay off your debts by changing only a few variables at a time. The calculators can help you save thousands of dollars over the course of your loans and pay off debts sooner than you think. You may also want to look into debt consolidation and federal loan forgiveness programs offered by the federal government.
Saving is an idea which should automatically come to mind when planning an early retirement. The earlier you start saving, the better retirement you’ll enjoy. Setting aside savings every month will secure resources for tough days as well.
Aside from your budgeted regular expenses, emergency funds, debt repayments, and savings, be sure to start investing whatever is remaining. This will also be advantageous in taxation matters.
Develop additional income streams
If someone is planning for early retirement, they must have multiple sources of income. Investing in stocks, dividend paying investments, and property (for rental income) are all good options. You may also want to consider starting a small business earning money with a skill or hobby you’re passionate about. Speak early on with a boutique accountant to work out how to optimize your new small business for maximum earnings.
Keep spending in control
It is understandable that people are at different income levels at different levels in life. Usually in our youth our income is low, spending it at its peak, and savings is difficult. However, as we age and grow our income should be saved for retirement goals. To save for early retirement any spending on unnecessary items should be kept to the utmost minimum – no matter what our income level.
For comfortable and early retirement, life style may need to be downsized. The rule is simple, the more money is saved, the more comfortable early retirement will be. Cut down on things which are not needed in everyday life and put that money towards your financial goals. Moving into a smaller house can be considered as well, especially if frequent travelling is expected as a part of your early retirement life.
Keep enjoying the present day life
Although the early retirement is the main focus, living a beautiful life in the moment will make beautiful memories. Spend some quality time with your friends and family to make the most of every moment you have.