We all retire one day. That is a given. The only question is do we retire before we stop working (traditionally my favorite way) or does dying determine our ultimate retirement date? Why not choose the former? Why not choose to retire before the Social Security and socially expected retirement age of sixty-seven?
This article is the first of many that will be dedicated to like-minded people deciding not to follow the customary path. Creating both a new journey and destination; instead of defaulting to a date and time arbitrarily determined by society.
If we can agree that we are able to choose our time, why not pick 50? Sounds like a nice round number to me? Surprisingly it is much easier than you think!
Let’s first define what retirement really means.
Retirement in our definition is reaching that milestone when your passive income is enough to support your current lifestyle. This is often called Financial Independence. This is our personal Independence Day. This is the point that we are no longer chained to the “day job” due to money.
It is important to note that the objective for retiring early has a side benefit of taking away the excuses for finding your true work. This is the work that you have been searching for and yet have would probably not found. This is the work you would do for free. It may be volunteering for a charitable organization or starting your own sailing school. This is the work that you are passionate about; something you can fully pursue since you no longer have the burden of making a living. This is the work that makes your dreams come true and gets you up in the morning. If we recognize that we will retire someday, why don’t we put more energy into speeding the process up?
We all have the best intentions for saving money yet we seem to fall short. Granted, it is challenging today with the constant bombardments by advertisement, Internet, mass media, and keeping up with the Jones’s. The bottom line is that most Americans today have an average of $8,900 in credit card debt and not saved nearly enough to retire even at 67. This is as a result of both a poor offense (income) and poor defense (spending).
We all know that we should spend less, save more, exercise more, take care of the family, etc. We know what we should do; unfortunately life seems to always get in the way of our best laid plans. Really, we will get to that saving thing one of these days.
The historic rate of savings in the United States actually has dipped below zero the last few years. This means for every $1 coming in we spend $1.01 or more. How can you ever get ahead doing this?
The “must have it now society” has replace the saving or delayed gratification generation that came before us.
Our bodies and our energy levels don’t seem to be getting any better either. Why wait until our 60’s to travel the world. Do you think it will be easier 20 years from now? Statistically you are now more likely to become disabled then die by the traditional retirement age.
Today would be a great day to create the new passion and motivation to get you there quicker.
Granted, it is difficult to come home after working hard all day to plan, discuss, and work toward an early retirement. Like many habits, it is difficult at first but with some determination you can change your outlook.
How about finding our life’s work while we are actually alive? Picture yourself working with a non-profit organization that utilizes your experience, skills, aptitudes, and brings you the happiness you have missed while on the daily work treadmill. How about finding new work that helps others and yet rekindles your own passions? Seriously, are you one of the lucky few that are really happy with your current job? Why not manifest the path to finding your true work?
Perhaps you just simple want to stop working and pursue a hobby or sport that you could not find the time for during the working years. Maybe you wish to travel, play a musical instrument, or learn a new language? The sky is the limit for our capacity to explore and learn.
- Spend less than we earn. I bet you have heard this before. Consider this, do you know anyone that has retired early spending more then they make? Save at least 10% of your income automatically each pay period. As in the book The Richest Man in Babylon so eloquently states, “10% of all you earn is yours to keep”. This simple advice is the corner stone of leaving the rat race early. Make it automatic by transferring directly from your paycheck this money automatically. This can be handled through your payroll department or through electronic banking. Had we followed this simple secret alone, the thought of our work at the salt mine tomorrow could not creep back in our consciousness!
- Build a reserve. Once you begun to save, have an emergency fund with at least 6 months pay. This step will take away the excuses for reaching for the credit card every time a so-called emergency happens. When you can sleep at night knowing that you can handle a new transmission, a repair to the house, or an unexpected trip across the country, you can thank your emergency fund. Today’s economy with job uncertainty makes this fund more important than ever.
- Only use credit to buy a house and the first car if necessary. Credit has become so commonplace that we hardly carry cash anymore. The problem is that we tend to disconnect the buying experience from the cost. It is as if our brains hibernate during the purchase transaction. However, we do tend to wake up and remember what we charged when the bills arrive. Now, another new monthly resolution occurs; once again promising ourselves that we will limit our spending going forward. Even though I have paid my credit card off in full each month for 10 plus years, it took me 47 years to figure out it is better to use your ATM, cash, or check. You now instantly remove the money from your account and at a minimum ask yourself if you have enough for additional purchases. The purchase experience is slowed down, it becomes very real quickly what you are spending money on, and you now begin to question the real need.
- Invest the savings. Make your money work for! Regardless of your age, you need to invest your money wisely. The younger you are, the more time you have to handle large market fluctuations like we have witnessed recently. An investment portfolio should be created with a mixture of stocks, bonds, real estate and cash. We will explore specific ideas of how to invest our savings in future articles.
- Set big goals and enjoy the process. Why not determine now that your new retirement age is fifty? Statistically it is shown that people who set goals have a high probably of reaching them. Create some life changing goals and begin today. Set goals for each day, week, month, and year. You will soon be amazed at how quickly dreams can be accomplished.
- Measure your results. Begin to develop the habit of tracking your financial pictures. Tracking can consist of budgets (ugh!), spending plans (little better), or another approach; monitoring the results as described in Your Money or Life by Joe Dominquez and Vicki Robin. They suggest that you measure the true cost of what it takes to work, i.e. costuming, commuting, dry cleaners, snacks, lunches, and drinks to unwind from a rough day. Don’t forget to calculate how much time these activities take in maintaining your 40-hour per week job. You will quickly find that it is safe to add 10 to 15 more hours per week. Software programs such as Mint and Quicken are great tools that keep you update with your spending. That you cannot measure, you cannot control!
Let’s take the journey together
Personally, we have planned for years to retire at a young age. The thought originally was to “Retire by 40”! Now are sights are set clearly for age fifty five as the magic number.
We invite you to follow our progress and becoming part of the movement. We simply ask for your feedback, letting us know how we are doing. Give us your ideas and watch for new articles.
We will meet again soon.