Retirement used to mean reaching a certain age and slowing down, but retiring early is within reach of us all.
The key is knowing what you want. If achieving financial independence (early) is something that excites you, you’ll have to do certain things to get there. That usually comes down to saving and investing.
- save a set amount of your income each week, maybe it’s 10%, 30% or even 75%.
- build up an emergency fund so you don’t need to dip into investments
- then invest the rest. Index funds (the boglehead method) are probably the easiest method to understand. You can really just “set and forget” it. Basically it’s a three fund index portfolio that you consistently invest into over time. This is what I use: Vanguard as my brokerage firm. My funds consist of 90% VTSAX, 10% VXUS, and 0% BND. That allocation will change as I grow older.
Keep your job, save your money, even if it’s only a little bit each week. Then eventually *given enough time* you are ready to retire when:
- You’ve finished building your golden nest egg. This is about $1,000,000, which sounds like a big number. If you attack this number a little bit each week though, it’ll be here before you even realize it. The days are long, but the years are short. We’ll go through numbers later.
How can you save more?
It won’t happen over night
Cut your biggest expenses: Housing and Car payments
- can you swing renting a room out of your house? or renting the room out of someone’s house?
- Instead of buying your dream home, why not buy a duplex to help with mortgage payments?
- do you lease your car? or make payments? why not buy something with cash if you can swing it? You don’t need the latest car, or do you?
Next, cut your food expenses.
coffee at home helps, a little bit. Going out to eat on the other hand? That’s something that can be eliminated or drastically cut down. Make your food at home and food shop each week so you know your stocked up. This is a habit and will get easier as you get better. This eating at home habit can be LEARNED.
It’s a number
Retiring, and retiring early, takes effort and time, but eventually you’ll build up that nest egg to that retirement number.
See, retirement isn’t an age, it’s a number. A retire early lifestyle lets you be choosy about your work schedule. This opens up opportunities to:
- Spend more time raising your family and enjoying (low-cost but enjoyable) hobbies like biking around town, working out, or some creative endeavors
- Travel and take impromptu trips without needing to ask for time off
- Explore new interests and learn new skills at your own pace
With dedication and discipline, it’s possible to reach financial independence and retire decades earlier than the traditional retirement age. This lets you design a balanced lifestyle focused on your passions, instead of being run down by a career, for what?.
If you’re inspired by the potential of FIRE, take the first steps today. Review your expenses and figure out your car and living situation, stop eating out. Open investment accounts and start directing a set percentage of your income towards your future freedom. With a solid plan and committed execution, financial independence is within reach.
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Joe DiAndrea 