Have you thought of retiring early? You are not alone: many people have thought about it. The truth is that most of us cannot retire early due to low income or family responsibilities. But if you’re lucky enough to have financial control over when you retire, then consider it. The path to early retirement is challenging, and takes discipline to save and invest. So, how might you go about it? Don’t worry; we’ll look at some practical steps in this guide.
Why Should You Retire Early?
First, let’s look at why you might want to retire early.
It’s an opportunity to become your boss.
If your dream is to start your own business, then early retirement is for you. You don’t want to spend your productive years as an employee. Early retirement gives you more time to get your business off the ground. Some of the world’s most successful businesses were started by people aged over 50, including McDonalds, The Huffington Post and Geico.
Less stress and more time for exercise and sleep
Nobody loves rush hour. The stress that comes with waking up early, getting ready for work, and dozing off in traffic isn’t something we wish. Can you imagine leaving behind the office grind and doing things on your terms? It will improve your mental health because you don’t have to deal with work-related stress.
More time to travel
Early retirement allows you to visit your dream vacation spots whenever you want. You’re no longer limited to company approved vacation time, but can manage it on your own terms. You get to make new friends and explore the world.
More quality time with friends and family.
This is perhaps one of the most important reasons to consider an early retirement. The usual 9-5 working hours drains us of quality time with our loved ones and this could lead to stress and depression at old age. An early retirement could allow you to arrange your work around your personal life, rather than the other way round.
How to Retire Early
We have seen some benefits of early retirement. Now let’s look at some practical ways to make it a reality.
Review Your Finances
The first step for anyone looking to retire early is to review their finances. There are two things you need to know to plan for the future. First, you should calculate your net worth (net worth is the sum of all your assets minus any obligations or liabilities.). The second thing is to calculate what you spend in a year. You can estimate your annual spending based on bank statements and other transaction receipts. With the Fluid Finance super-app, you can easily track your expenditure and income, all in one place. These calculations will help you modify your lifestyle and establish how much money you need to make early retirement a reality.
Leverage your income
You can cut down costs to a certain degree: if you’re trying to learn how to do this, check out our guide on how to budget. However, having multiple streams of income makes a difference. Cutting your expenses can be a struggle — It is a short-term solution — whereas increasing your cash flow is a long-term solution. You need to have a side hustle to diversify your income streams. The most lucrative side hustles are those that generate passive income. A perfect example of a side hustle is Fluid’s referral program, where you can make money by recommending Fluid Finance to friends and family. You can also take advantage of our ambassador programme, arbitrage and peer-to-peer. Remember, a passive income is a great way to cover your daily or monthly expenses.
Pay your debts
In preparing for early retirement, paying off your debts is a necessity. The peace of mind that comes with being debt-free is worth it. Retiring if you have debt is like boxing with one hand tied behind you. You must pay off your loans— student, car, house and business. Not having to worry about a loan in retirement is essential for your mental health. Being debt-free is mental freedom.
We can’t emphasise the importance of saving enough. You should save 25% to 50% of your monthly income if you’re looking forward to early retirement. To save that much, you need to prioritise your necessities (food, clothing, rent, utilities, childcare, and healthcare) and make some lifestyle changes. You need to live frugally. It is hard to build substantial, long-term wealth if you’re a spendthrift or an impulse buyer. You need to be frugal with money because it’s the only way to save and invest aggressively. You can open a retirement account. Where you put your money should be tax-efficient and high yielding. Fluid ensures your money works harder for you and allows you to earn a passive 4% interest on your main account deposits, a great way to increase your income.
Finally, focus on investment. Invest your money in a high-performing account. If you’re tired of saving and investing with traditional banks, move to a financial alternative like Fluid Finance. Fluid can shield your hard-earned money from inflation and currency depreciation. You don’t have to worry about inflation eroding your funds. With Fluid, users can access investment opportunities that are usually only open to traders and banks.
Early retirement is a complex decision. Understand that it isn’t about just money. Your health, family obligations, and what you’ll do with your retirement years are part of the decision process. Consult a financial advisor, trusted friends, and family members before you make the decision to retire early.