Do You Dream of Early Retirement? Here’s What To Do To Achieve It
I dreamed of being able to retire when I was 40.
I didn’t quite make it.
But a few people do manage it successfully. And I’m delighted to tell you that the method they use is not just good for you, but also good for the planet!
Have you thought about getting out of the rat race? Wouldn’t it be lovely to live life on your terms, doing what YOU want to do?
When you’re financially independent, you have so many more choices. If you like your job, you can continue working if you wish, but perhaps choose specific projects. Or you could gleefully wave goodbye to your current job, and train for a new profession or travel or do work that you love and are passionate about.
When you are financially independent you don’t have to stress about following your dreams. You can be flexible.
What Is Financial Independence That Allows Early Retirement?
How much money do you need to be considered financially independent?
A general rule of thumb is to have a net worth that’s 25 times your annual expenses.
So, if you spend $40,000 per year, you’d need a net worth of 1 million to be financially independent.
How Do You Get That 25x Expenses?
To put it very simply – you live below your means and you save. You live a frugal life for a few years in order to give yourself financial freedom and early retirement.
The more you save, the faster you can retire.
To use an example given by CNN Money, suppose:you earn $50,000 per year and have nothing saved so far. You will put your savings into investments that earn you a 5 percent rate of return.
If you save 66.5 percent of your after-tax income, you will need to live on just $16,750 per year to cover your living expenses. But you’ll be able to take early retirement in just 10 years!
If you’re willing to wait a little longer, say 20 years till retirement, then you can spend $28,500 annually on expenses and save the rest.
How to Live Frugally
If you’re willing to make some sacrifices now, and live frugally, well below your means, then you’ll reap the benefits in a few years when you will be financially independent.
But how do you live frugally? Here are some suggestions:
- List all your expenses and try to find low-cost alternatives – or do without.
- Perhaps buy a smaller house or rent a cheaper apartment
- Drive an older model car or ride a bike – or use public transport if you live in a city, and take advantage of monthly passes
- Do you really need cable TV or satellite TV?
- Reduce how often you eat out or get take-away or ready-made meals.
- Use a no-frills phone plan, and don’t upgrade your phone for the latest model
- Avoid expensive coffees
- Look for bargains in furniture and clothes by buying second-hand
- Clip coupons to save on grocery bills, and buy generic brands where possible.
- Don’t go on shopping sprees. Buy only what you really need
- Go camping instead of staying in an expensive hotel, or plan a staycation or a low-cost volunteer holiday.
Here are some more suggestions:
- Sell unwanted “stuff” on Craigslist.
- Sell your crafts or artwork on Etsy.
- Buy an investment property to rent out
- List a room in your home on AirBnB
When you earn extra income and save it, you achieve your savings goals even faster.
Get FIREd Up for Early retirement!
Have you heard of the growing FIRE movement? It stands for Financial Independence/Retire Early. More people are able to retire early with the help of tips on Reddit and also on blogs – including a great post called The Shockingly Simple Math Behind Early Retirement
Frugal Living is Green and Eco-Friendly Living
It’s no coincidence that living in a way that avoids amassing “stuff” is good for you AND the planet.
When you simplify your life, you’re less stressed. Less demand for stuff reduces stress on our planet’s finite resources.
Sometimes we just get too caught up in day-to-day living, in the latest fad, in thinking we don’t have choices.
There are choices. Sometimes it’s difficult to make sacrifices now for something in the future – but if your goal is financial independence, then it’s well worth it!
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Have you retired, or do you want to retire early? Do you think frugal living is do-able – or do you already live frugally? Let me know in the comments below.
Warm regards,
P.S. Don’t forget to download your free green living handbook “Live Well, Live Green” here.
Related:
- More tips on frugal living
- Freeganism or dumpster diving is not for everyone, but it might work for you
It’s a little late in the game for me but I always read these articles. I live off social security and a tiny pension. It’s definitely not luxury living but I have everything I need and some of what I want. Expectations are minimal but I can tell you most of us in my neighborhood are in the same boat for so many reasons. You can plan and plan and then the plan goes and you work with what you have. It’s the attitude you bring into retirement that most don’t think about.
You’re absolutely right Marlene! It’s something not often discussed, but attitude is crucial for retirement. You can see it everywhere – some people really enjoy it, others hate it, yet it’s not divided along financial lines. And yes, the best-laid plans….. We never know what is just around the corner (perhaps it’s just as well!!!). Thanks!