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How can I retire early? If you’re like most people, this question has probably crossed your mind more than once. After all, being able to wake up when you want and spend your days doing your favorite activities sounds like a dream come true. However, as exciting as this may sound, being able to leave your 9-5 behind takes more than a dream. Here are things you need to know about early retirement.
What Age Do You Want to Retire?
The age you retire plays a huge role as to how much money you will need, in addition to the lifestyle you want to lead. If you want to retire at 40 or 45, you need to have enough money saved to cover all of your monthly expenses without going into the negative. This requires a significant amount of money either in a retirement account, personal savings, or taking advantage of unused funds from a life insurance policy in the form of a life settlement. If you aren’t sure how the process works, perform an online search for life settlement brokers 101. There are plenty of free guides online that explain what life settlement brokers do and how they can help you. Most importantly, they can advise you whether it’s even feasible for you to consider this route.
What Type of Lifestyle Do You Live?
The lifestyle you want to lead in retirement is equally as important as when you retire. Do you plan on living modestly, or do you want to travel the world? Also, will you downsize into a smaller home, or will you mortgage to pay in full? These are the types of questions you need to ask yourself prior to creating an early retirement budget.
Financial Planning
When you retire will depend on how much money you’ll need to live comfortably. The one thing that will lead to success in retirement is having planned successfully. Start by creating a mock budget without your regular paycheck. Include your current monthly expenses including any extras. Now, look where you can cut costs. If you plan on working part-time, and know how much that will bring in, add that to your disposable income. Otherwise, you need to determine how you can retire and live on the money you’ve saved. Oftentimes, people who retire early do have a lot of money put away, work side jobs or own rental properties.
Change Your Spending Habits
Even if you have a lot of money put away, you still need to change the way you spend money. Without a weekly paycheck, there’s no way to replace what you’re spending. Look for ways to decrease your debt load now. Pay off credit cards and cancel subscription services you really don’t use. You can also save money by cutting your own hair, buying generic clothes when possible and buying capsule collection clothing. If your housing is eating up the majority of your monthly income, you need to consider moving. Saving even a couple hundred a month adds up quickly.
Invest Wisely
If you’re looking to retire within the five to 10 years, now is the perfect time to start investing. Speak with a financial advisor about which types of investments will yield the highest profit. Some types of investments can produce a fast profit, whereas others require more time to build liquidity.
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