Folks, today we have a post from Amy Nickson at Working Moms Word discussing some early retirement lessons. She is taking the blogging microphone today as I am attempting to sell our existing home and remodel our new place in a very short timeframe. Please do check out her site and provide feedback to her new posts. She will certainly appreciate the support.
I can especially relate with her experience with her single mother attempting to do the best she could. My mother married at a young age, had yours truly 9 months later, and then divorced after 6 years of marriage. She did the best she could, often working several jobs to help support my brother and me. The work ethic she demonstrated to me shaped my life immensely.
We are all at different levels and stages in our personal finance ER journey. Amy wanted to share her perspective with our readers. Enjoy!
Early retirement: Lessons to learn from people who achieved it
Planning for early retirement? You should be very confident about it unless it can create financial havoc in your life. Most people fail to take the necessary steps or plan so that they can lead a stress-free life after retirement. According to financial experts, most of the people fail to do a proper budgeting during their earning years and face problems later. You need to determine how you want to lead your life after retirement and plan accordingly. So, you have to work hard to retire early. Announcing early retirement is full of challenges, but not impossible. If you’re eager to achieve it, then you must follow these lessons taken from people who achieved financial independence in their life.
Proper planning is the key
According to the experts, it is always a wise decision to plan your retirement from a young age. This is going to allow you to achieve financial independence in your life. However, you must make a proper plan. Other than getting the retirement savings plan in place, you need to pay attention to other things as well like the ordinary savings accounts, investments, insurance, the time within which you would like to retire, the amount, which you would like to save within that time period and so on.
Fix the place you would like to live during retirement days
You have to think every possible way to lowering the expenses to live your retired life in a better way. Remember, the cost of living changes from place to place. So, if you think you’re living in a costly place at present and things are pretty costly than another place, then you need to shift to a cheaper place after your retirement.
Pay off your debts as far as possible
The debt situation is rather seen to be getting out of control. People are trying their best to become debt free. You will have to try and pay off your debts as soon as possible as this is going to provide you with the option to save more. The more you save, the more secure will be your future.
Consider a budget and analyze it on a regular basis
You may face many changes with time. So, consider a plan, keeping the changes in your mind. Such as living cost, utility costs, medical cost, and so on. So, you must formulate and maintain a budget from now. Remember, the cost of living and the household debts are increasing day by day. Budgeting helps you to save more and thus become debt free. You should also analyze and modify your budget on a regular basis. Budgeting helps you in lowering your expenditures well.
Save, Save and Save
Don’t think about how much inheritance your father or grandparent left for you. If you announce early retirement based on it, then you’re making the biggest blunder. You must establish proper savings back up first and announce your retirement based on that saving. Thus, you’ll be able to lead a stress-free life after retirement.
Adopt some tricks
According to recent research, most of the Americans are unable to save any money after making their credit card payments. If you’re one of them, then you can’t achieve early retirement or announce financial freedom. You have to minimize the usage of credit cards as far as possible. You can follow some tricks such as:
- Use cash instead of credit cards to buy items.
- Increase your income through investments and other part-time job options.
- Put all the extra money into a savings account.
- Set a shopping limit.
Convert your retirement savings into guaranteed income
When you’re thinking about early retirement, you must have such savings that give you guaranteed lifetime income. You shouldn’t spend the principal to ensure that you never run out of income in your retirement. Try to live off the income that you’re able to generate from the savings. You can also buy annuities for yourself, or convert some of the types of your existing assets into annuities as well. An annuity is a guaranteed income and purchasing it can simply turn over some of the savings that you’ve made to an insurance company. The insurance company in turn will go on paying you a monthly amount till you live even if you live for long. The benefits that you can get are not simply the lifetime guarantee through an annuity, but, in general, you can also get a higher monthly income, in fact much higher than any savings account or other investments like this. So, you can convert your simple savings account into annuities to guarantee lifetime income and that too higher than what you would have got through the simple investments.
Think about passive income sources
Passive income allows you to earn money. Some great passive income sources are a rental property, online business, stocks, investments, and so on. But you have to gain knowledge before implementing passive income. So research on the internet, read books, journals, to avoid risk factors.
People have a different way to look at their life and so the circumstances in the life of the people are different too. Remember, your determination is very important to achieve your goal. Remember, you are not going to have any continual stream of income, so you must be confident enough to take such decision. Aiming to become an early retiree is not enough, to achieve it, you need to live a disciplined life. However, a common man can’t calculate how much money is required for living a happy retired life. So, you must take help from a financial planner to get the every possible advice to achieve early retirement.
Please check out Amy at her site Working Moms Word.