Is being a retiring early something you have thought about? Have you ever thought of what you would do with all the free time when you don’t have a 9 to 5?
Just the thought of all that free time and freedom has made you start to breathe better.
There are average people retiring faster today because the opportunities to make more has grown due to technology, the internet, and a greater access to global markets.
In this post, I’ll share with you the five points that helped large amounts of regular people retire early at least by age 40.
Stay tuned until the end and I’ll have a incredible Bonus free eBook on wealth and prosperity secrets and a free online course.
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The five things to retire early by age 40 are:
- Choose your Early Retirement Number
- Devise a Plan
- Build Your Skills
- Join groups With People Who Plan to Retire Early
- Track Your Progress
- Choose your Early Retirement Number
Dave Ramsey, a renowned financial advisor, once said retirement is not a age but a number. What did he mean by this exactly.
What Dave was saying is that to retire simply means you have enough money to still pay your bills after you stop working.
Think of it this way if you had a total of $20,000 and your expenses are $2000 a month then your money would last only 10 months.
Now imagine you had a million or several millions you would last way more months and years verses just $20,000. The mission for early retirement is to find out what age you plan to retire then afterwards how long you plan to live after that age.
You should also know your monthly and annual expenses so you calculate the cost of your living once you decide to stop working.
Before you decide on your Early retirement number observe the example. Let’s consider a person name Jacob who wants to retire early by age 40 and currently 30 years old.
Jacob plans to retire early at age 40 and expects to live to be 70 years old. His monthly expenses are $1200 so that brings his annual expenses to $14,400. His annual expenses over 30 years equals $430,000.
Wow! That seems like a lot to accumulate in 10 years. If Jacob accumulates $430,000 by age 40 he can expect to live off of that cash until she 70.
That sounds good but where still not quite done. For Jacob to reach his retirement number, which is $430,000, he has to save $43,200 a year to make it.
That really is pushing it but it’s still possible to reach. If Jacob has a salary of $70,000 and after taxes $55,000.
If Jacob can only max out his savings at a high rate of $32,600 a year because other cost may not be under to much of his control, then over 10 years that is only $326,000. Jacob is off by $104,000.
So by doing the math Jacob knows he would have to hustle hard to make $104,000 in 10 years, which is from age 30, an additional 10,400 a year.
If Jacob’s savings from his salary and hustle pan out then he will have succeed at saving $430,000 by 40 and can last him 30 years.
I would strongly recommend to Jacob or you to learn how to master investing into income-producing assets so that over the years of your early retirement your not running lower on cash but are getting more money from your assets to continue to support your life.
There is a movement called FIRE, which is Financial Independence Retire Early you may already know of this movement.
Their overall philosophy is to save aggressively and invest primarily in the stock market for compounding by mutual funds or other such investments.
The philosophy is not bad but you want to remember to incorporate investments that are cash flow positive so if the market crashes you still have cash flow from investments from businesses or real estate or anything you choose to invest in.
It would be unwise for Jacob to have hit all his saving goals and have $430,000 at age 40 and then broke at age 70.
So the wise thing to do is to know your retirement number and how you will achieve it along with a solid plan to invest in income-producing assets that pay you for the rest of your life that are well above your cost of living.
It starts with knowing your retirement number.
Jacob, by simply knowing the exact numbers he has to hit increases his chances of hitting those numbers and retiring by 40 due to him knowing his target.
In knowing his retirement number and other relevant numbers Jacob knows that he will have to increase his income or reduce expenses to save more.
Reducing expenses can only be done up to a certain limit but increasing your income is limitless.
The Best ways to increase your income like Jacob what have to do check out this article on proven techniques to boost income.
The thought of having massive cash or in the previous example with Jacob having 30 years worth of cash by age 40 sounds impressive.
I would encourage Jacob to not stop at that number and chill. By not stopping, i mean understand that Jacob could live beyond 70 years old and then have nothing left.
So as i stated earlier it is best to have a retirement number in mind then a savings and investment plan before moving on.
Check out this data that shows the reality of people who are 55 and older. People are not taking their retirement seriously. You are aiming to retire by 40 so you have to get started sooner and be more aggressive with saving and investing. Don’t fall into this category of people even if your know where near age 55.
Next Steps
Step 1: Write down all the reasons you want to retire by age 40
Step 2: Choose what you are going to sacrifice to achieve early retirement
2. Devise a Plan
Planning is not always easy but it doesn’t have to be hard. Your plan should include the numbers you need for early retirement along with how you will save and invest the money.
Next Steps
Answer the following questions as a guide to start your early retirement plan:
- Decide on target early retirement age
- Pick a target early retirement number
- Set your early retirement goal in writing and place a deadline on it. Example: “I earned 1.5 million dollars by December 31st 2035”.
- Describe in detail your plan for saving money with actual numbers on paper
- Describe in detail your plan for investing the money on paper
- Investigate if hiring a financial advisor is a good idea for you (This article helps you decide)
- Memorize your plan
This plan is to get your mind thinking and in motion to make your plan actionable and realistic.
Deadlines are important because this forces you into activities that lead to getting you the results that you need.
Once you have everything on paper now it is time to take action. Everyday you should be a day closer to your early retirement goals and if you’re not then refer to plan and ensure your actions are in direct alignment with your plan and goals.
Life is full of surprises and life changing events so the plan can be changed and updated as you live your life but having the plan gives you a good direction to go in.
Not having a plan is a real mistake just as it is to have a plan but do nothing with it.
3. Build Your Skills
Unless you have a high salary it will be very difficult to retire by 40 by saving only. Here this section is for those who need to build skills to become able to make more money so they in turn can save and invest it.
If a person is age 25 and is a minimum wage earner and want to retire by age 40 saving all your money still wouldn’t get you there. At this point you would have to build your skills that increases your “earning ability” so you can increase your income.
Your earning ability is your ability to earn. If a person makes $50,000 a year this means that the person’s earning ability is $50,000.
The objective is to master skills that enhance your earning ability which may depend on your goals.
For example, If you’re an employee in sales and on average you make $45,000 annually then focusing on improving your selling skill will lead to an increase in earning ability.
If a salesman reads books and sales, listen to audio programs on selling and even attend seminars on selling will help to improve a salesman’s earning ability leading to higher income from his learning.
Whatever field your in ask yourself what skills are necessary for you to increase your earnings. The skill may be different for different people. If your at a job that has limited opportunities you may have to build skills that are in demand and that other employers would hire you and pay you more.
If your a business owner then the skill would be anything that directly contributes to getting business results. If you discover that you need more then one skill which is often the case then focus on mastering one skill at a time.
Use the 10,000 hour rule, which says to spend 10,000 hours studying for a specific skill until you master it. If you are trying to do things faster then focus one year on a building a specific skill before moving to the next skill.
The reason you should master one skill at a time is because this is a more effective technique than trying or learn 3 or 4 skills at the same time.
Next Steps:
Step 1: Assess your current situation and uncover what skills you need to earn more money
Step 2: Discover what skill you need to learn and master that is the most helpful to you at this moment that increases your earning ability
Step 3: Make a study plan or time each day to set a side one hour to study that skill
Step 4: Use your knowledge from studying to apply new concepts at least 5 to 7 times before moving on
Best way to build skills is to read so start building skills with these books from this article. Also, the more knowledge you acquire the smarter you get a personal finances. Check out these awesome websites regardless of whether you want to retire before 40 not.
http://www.cfinancialfreedom.com/
https://themorningbuzzblog.com/
https://nottaughtatschool.co.uk
http://dearyoungprofessional.com/
https://www.moneywisesteward.com/
https://www.financialsamurai.com/
4. Join Groups with People Who Plan to Retire Early
I was onced asked “when do i want to retire?” by a employee of a previous company i use to work for. I was nervous and choose to hold my true thoughts of retiring early only because i knew his concept of retiring early was out of his reality.
By reality i mean retiring early was not a part of his culture of working 40 years and then retiring. He was indoctrinated so he only believed in working hard over his entire life as an employee then to retire at the normal age of retirement.
The lesson here is to disassociate yourself with people who are not aiming to do outside of traditional things like retire early. Finding like minded people makes what you’re working to do easier.
I know from experience that being around the right people encourages you and it is like iron sharpening iron. Why do you think wealthy people hang around other wealthy people?
It is because they have much in common and want to grow their knowledge and network but ultimately they usually have similar aspirations.
It is the same here so you must find other people in person or online groups that are meant for the sole purpose of returning early.
Here are just a few online communities that focus on the retiring early:
Reddit
Millennial Money
Podchaser
Next Steps
Step 1) Pick a community of people looking to retire early
Step 2) Get involved in the dialogues and ask questions
5. Track Progress
For you to truly retire early by 40 you have to track your progress. If you have a blueprint to retire early and have your goals broken up into smaller parts over time that lead up to your overall goal then this makes it easier.
Choose a metric to track. It is no brainer that the metrics in this context is your money saved and invested but also your net worth.
When you track your progress you will notice if your cash savings and investments are increasing or decreasing allowing you to adjust your activities if necessary.
Here are a few free tracking tools for monitoring your progress when you get started or as you continue.
Tracking Resources:
–MINT
–Personal Capital
–Clarity Money
Next Steps:
Step One: Choose metric(s) to track weekly or monthly
Step Two: Access tracking tools or use your own tracking method
Step Three: Monitor progress
If you thought this information was helpful leave a comment below on what was most helpful or things you would have liked to have heard.
**TO FAST TRACK EVERYTHING AND GO STRAIGHT TO STARTING A BUSINESS START HERE. **
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