Unless you are lucky enough to absolutely love your job and can’t even imagine not being able to go to it every day, you probably dream of taking an early retirement.
Without advance planning and work, it will be hard to achieve that goal. But you can definitely get there by applying a few strategies now.
Here are the top 6 early retirement tips that you can start working on today to get you closer to your early retirement dream!
Get Rid of Your Bad Debt
Nothing can derail a great early retirement plan like bad debt, so eliminating this is the first tip you need to look at. All debt is not the same, and there is good debt that is healthy at certain levels.
But bad debt typically has high interest rates and can snowball very fast into payments that are difficult to manage.
One common example of bad debt is credit card debt. I know how easy it is to use that credit card and have been in a position where I had to pull myself out of substantial debt from misusing it.
If you are having problems getting ahead or making your debt payments, the great news is that there is wonderful help out there.
Many people find it hard to reach out for the help that is available. But getting you and your family back on stable financial footing is well worth it!
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Take Advantage of All Tax Free Savings Plans Possible
If you have access to a 401k plan at work, you’ll want to take full advantage of it. Most companies that offer one also contribute a matching amount up to a certain percentage or dollar amount.
Not taking advantage of the matching funds is literally leaving free money on the table!
For example, say you make $50,000 a year and your employer matches your contributions up to 6% of your income.
If you contribute the 6%, that will be $3,000 over the course of a year, and your employer will contribute another $3,000.
If you choose not to use this program, you are giving up the free $3,000 every year that could go to your retirement as well as the interest and gains from those funds.
Investing in an S&P 500 index fund and assuming the historical 7% rate of return, in 30 years that $3,000 yearly free money could turn into $294,775!
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Another advantage is that your contributions are tax free, meaning that your take home pay won’t be reduced by the full amount of your contribution.
If you are paid biweekly, contributing $3,000 would take out about $115.38 from your paycheck. But since taxes will not be taken out on that amount, your take home pay would only be reduced by about $98.08 assuming a 15% tax bracket.
If you don’t have a 401k available to you, my best advice is to pay off that bad debt first! Then open a tax free IRA for both you and your spouse, if you have one, and max those out.
After that, open a Roth IRA for both of you and put as much into those as you can.
Roth IRAs give you a different tax advantage from traditional IRAs. You use after tax dollars for your contributions, but all the interest and gains will not be taxed when you take them out.
This is hugely beneficial to you during retirement when you don’t have to pay income taxes when using those funds.
How much will you need to retire? Here’s a great calculator that you can use to determine how much you’ll need to save for your retirement:
Minimize Your Expenses
The 2 steps above will be much more difficult without making an effort to minimize your expenses. If your goal is to retire early, you need to set the priorities that will make every dollar count toward achieving that goal!
Now I’m not talking about making the kind of sacrifices that means you have to give up every enjoyment in life.
What I’m talking about is prioritizing your expenses to ensure they are adding value to your life in relation to your goal of early retirement. Here are some examples:
~ Car payments–I hear all the time, “You’re always going to have a car payment, so I may as well trade to
a new one every few years!”
No, it’s a choice to always have a large car payment, just like I once did.
A car is simply transportation to get you from one place to another, and your needs are how well it fits your family and how expensive it is to drive and maintain.
People who successfully retire early don’t see value in a car that is more than they need.
Once I changed my way of thinking, it amazed me by how much money I could save every month.
A $35,000 new car will cost you about $650 a month for 5 years. But you could look for that same car in great shape with low miles that’s already 5 years old.
With the huge amount of depreciation in value already figured in, you could buy it for around $20,000 at $450 a month for 4 years. That’s a savings of $17,400!
Not only will you save in buying costs, but with regular maintenance and good upkeep, your car can last well past the time it’s paid off.
This gives you time to put that car payment in the bank and build up a great savings for when you need to replace it!
~ House payment–How much house do you need? How willing are you to refurbish a home? How much are you willing to sacrifice to pay it off by your early retirement date?
These are just a few of the questions you need to ask yourself.
The decisions you make about your housing costs need to be made in relation to achieving your early retirement goal.
You may love that completely remodeled 3,000 sq. ft. house with the gourmet kitchen, a hot tub, and 5 bedrooms.
But if the 2,000 sq. ft. house is on the market that needs some remodeling, has low property taxes, and a price that will enable you to pay it off earlier, are you willing to sacrifice and buy that instead?
This is the mindset you need to have when evaluating your housing costs.
~ Monthly bills–Any way that you can reduce your monthly payments for things like utilities, cell phone bill, insurance, etc., will free up cash for your retirement goal.
You can research different cell phone plans and insurance companies and shop around for the best rates. Even being mindful of small things like adjusting your thermostat and turning off lights can add up over time.
About 8 months ago, we switched to an hourly pricing program with our electricity provider because it was supposed to be more economical. Since then, we’ve saved an average of 20% on our electrical bill each month!
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Develop An Additional Stream of Income
Up until now I’ve talked about how to reach your goals with the money you have coming in now. But no matter how much you tighten your belt, there are times when you can only stretch your dollars so far!
So an option that you may want to consider is developing another source of income.
That could be a part-time job, or better yet, a side hustle that lets you be in control of how much money you can make and how much time you can devote to it.
If you’ve never heard of a side hustle, check out our video below, What Is A Side Hustle? [Why You Need To Start One!]
I started blogging and affiliate marketing as my side hustle awhile back with a goal to quit my job and be home with my family more.
I’ve been able to retire from my part-time job, and we are well on track for my husband to retire many years before his full retirement date.
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Pay Yourself First
Pay yourself first can be a misunderstood concept. When I first talked about it with my 16 year old daughter, she got the impression that you spend your money on what you want first, then pay your bills and savings with what’s left over.
Needless to say, she got a rude awakening!
Pay yourself first means that you set your savings up as a monthly bill, and pay yourself that amount into your savings account each and every pay day first.
Then you pay all of your household bills and monthly payments that are due, and THEN you spent what’s left over on the things you want.
You need the mindset that your financial security, now and in the future, is a priority like any other financial obligation.
Once you do that, you will be surprised how much easier it will be to start recognizing the things that don’t add real value to your life!
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Create a Written Plan to Reach Your Goals
You can think about a goal a hundred times, but there’s something about actually putting it down on a piece of paper that makes it seem more important.
A plan and a goal make you more accountable when it’s staring you in the eye–which is exactly why you need to write one!
Your plan can be set up any way that works for you, but you need to be specific with what you want to
achieve and the steps you will take to accomplish it.
Here’s a couple of examples:
~ Instead of saying, “I want to start putting more into savings each month”, you say, “I will decrease my grocery bill by $50 each paycheck and add that money to our savings account.”
~ Instead of saying, “I will start contributing more to my 401k”, you say, “I will increase my 401k contributions by 1% each time I receive a raise in salary until I am maxed out.”
Each time you create a specific goal, you become more accountable and you can check your progress and see your achievements.
Not only is it easier to stay on track, you will get the sense of pride and accomplishment every time you see your success!
You Can Start Your Plan Today!
Retirement can seem very far away. But if you take these 6 early retirement tips and apply them to create financial security for you and your family, anyone can achieve their goal!
Do you have an early retirement plan? Have you created your goals? Do you have a plan for eliminating your bad debt? Let us know your tips in the comments below!
Retiring early avails the opportunity of staying more at home with family and still getting money. Making plans helps in aquiring this. Determination is also a factor that can’t be over ruled. Online wealth affiliate is a very good idea. Using the phone for something beneficial. Thank you so much for sharing this
You’re welcome!
Retirement seems to be way more difficult these days than it was for our parents. Economy is different today.
But I have been researching a lot and have gathered useful advice. Right here on this post, I must thank you for two points you mentioned.
1. Paying ourselves first and
2. Opening my eyes to the opportunities of extra income online.
Thanks!
I always remember my dad saying that the key to a great retirement was finding a good job with a pension. Unfortunately, more often than not companies don’t have defined pension plans anymore. So you’re right, retirement planning is more difficult now than it used to be.
But by starting to save early and having multiple streams of income, a wonderful retirement is possible for anyone!
Thank you very much for your insight knowledge about ways to retire early. It was my dream to retire as too and now is a reality. I Thank God for the online world opportunity that has made the impossibilities to possibilities. I noticed you mostly focused on ways to retire early in the United States of America; are these ways of early retirement applicable in Canada as well and the rest of the world?
These tips will be helpful for anyone wanting to retire early. In fact, a great benefit of creating an online business is that you can work from anywhere in the world!
Hey, I enjoy a lot while reading your post on 6 earlier retirement tips. I found it very useful for everyone. My favorite is the make a plan part. I’m all about making a plan to accomplish something. Lots of people don’t create a plan to follow and I think it hinders them in achieving their goals. My wife and I are actually currently in the process of looking at houses to downsize. We are also reducing our spending. Thanks for your lovely guide
I agree! Whenever I’ve created an actual plan to complete something or accomplish a goal, I’ve been much more successful.
Hello,I am planning for my early retirement. Now I found your tips on earlier retirement and they are really the best one. I hope if I follow them I will achieve my retirement goal. Now I have to minimize my expense and increase my income. I am making a plan for it. People who successfully retire early don’t see value in a car that is more than they need.
Making a plan is the best first step–good luck in achieving your early retirement goal!
Hello, Your top 6 early retirement tips are very helpful for everyone like me. While reading I understand each tip in detail. Now I am writing my specific goal for everything I want in my life. Then convert then in action plan. I hope with your guide I will soon achieve my earlier retirement. Very guide helped in saving money also. Thanks for sharing.
You’re well on your way, and I have no doubt you’re going to achieve your goal of an early retirement!
I was thinking of retiring early as possible and with this post, I guess it is possible to do so. I think I would start working on some of the tips that you have given to me on this post and hopefully, I can achieve what I have in my mind.
I wish you every success for a terrific early retirement!
For me I have already quit my job and working for my self and family although I am the youngest among my siblings,but I want retire early;that would be in my early 50 but I know it would take a lot from me but I have to do it.
Thanks for this tips I would definitely add them to my arsenal as we cannot know it all, but what to do now is cut my car expenses and then start up another savings plan with another pension company.
Cutting my car payments by buying a great used car was instrumental to getting our family back on track financially. With your car expenses down and saving more, you’ll be well on your way to an early retirement!
I’m really glad I found this article! One of my goals is to pay off my credit card by April this year. I was not able to do it before due to many expenses, and the interests did not help at all. I want to become debt free, it will make life easier and I can focus on investing in what I truly want, like building my house e.g.
I agree that you don’t need to buy a new car all the time. Pay off the one you have and with good maintenance the car can last you many years, even with a lot of mileage.
i have no savings, but I own land. As soon as my credit card is paid off, I will start saving every month, like you proposed in your article. You have given me great tips and I feel more motivated to reach my goal of being debt free.
It sounds like you’ve got a great plan, and I have no doubt you’re going to reach your goals–I wish you every success!
Hi! There are a couple of things that I still have to learn and it’s getting rid of our bad dept. I must mark this as a priority. If I don’t do exercises enough, we should try to join this tennis program.
The other point that caught my attention is that we should take advantage of Tax Free Savings Plans.
Getting rid of bad debt can be daunting at first, but once you start making significant progress, it feels so good and you just want to keep going! Once we were able to get rid of our credit card debt, we increased our retirement savings as high as we could afford.
So many people we know take vacations every year and drive brand new cars every few years. But when it comes to retirement, they haven’t put much away and will carry a lot of debt into their later years.
With retirements lasting 30 years or more, that’s not a situation that will provide anyone with the security they’ll need. So congratulations to you on starting your journey to a wonderful early retirement!
What great advice. I think planning is key. I’m not thinking about retirement yet but maybe I should start. Thanks for giving all these actionable tips that I can use to start thinking about the future. That calculator thing is really interesting (but a little scary). Haha. I’m trying to create a side hustle like you suggested. Time is always a factor when doing these things. What are the best ways to create passive income for the future?
The earlier you start thinking about your retirement future, the better you’ll be prepared for it!
I definitely think that some sort of online business will be the #1 way to create passive income going forward. Not only can you start it before you retire to help you build your nest egg, but you can continue your business in retirement and work on it no matter what your plans are!
Whether it’s affiliate marketing, selling products online, writing and selling eBooks or training courses, or simply blogging about something you’re passionate about, an online business has huge potential now and in the future.
Thank you for stopping by and good luck!
I really like the information in this website and especially how it incorporates being an affiliate for WA good idea. Actually this is the only retirement plan I can actually say will work for me since the site is focused on the baby boomers most had good paying jobs, superannuation or stock bonds and are receiving pensions. For the millennium babies, there retirement will look quite different. May I suggest a post for the millennium babies since they are focusing on Cryptocurrencies and Investments. The Housing market is steady but hard for lower income earners to purchase their first home but can be achievable with seminars available to teach them how to purchase and yield in duplex properties. At a second glance at the website I then realised it was a WA affiliate website yes I would of signed up if I was looking to retire from my day job. It looks legit and not scam like its factual and really honest I think 55-60 age group would love this website but never know younger ones are becoming more concerned about their future and want early retirement from 9-5 job.
Wealthy Affiliate is definitely not a scam and has helped thousands of people make real money online. The difference between WA and most other programs out there is that they actually teach you how to make long-term, sustainable income and they are honest about the time and effort it takes to do it.
Too many programs out there are doing nothing but filling the pockets of those who create them while making inexperienced people think that they can actually get rich quick. More often than not, they don’t make money, in fact most lose money–sometimes a great deal!
Thank you for stopping by and taking the time to comment!
Hi Janelle and what a great post- i am 60 now and I still have a few things on your list to sort out and I just had a look at the website Wealthy Affiliate via your link and feel this might be an excellent way to create passive income so when I stop working I will still have extra money coming in which would be so helpful as I am on my own so need all I can get if you understand this.
I don’t want to be old and poor as thats no way to live so Im going to join for free and take a look and if it looks good Ill gp premium and get building – thank you for sharing this really important information
You’re welcome, and I’m glad you found it helpful! Wealthy Affiliate is definitely a fantastic platform to start your online business and create passive income for your retirement.
I host 6 websites there now, and can say that their program is the best I’ve ever experienced in terms of training, website hosting, and their great community forum.
Good luck with your online business, and I’d love to hear back from you about how it’s going!
What a great post! It’s well-structured, engaging and informative. I particularly appreciate the way you’ve clarified, “Pay yourself first” and “Create a written plan”. Where the written plan is concerned, your examples set off some lights in my head. I’ve always had written “plans” but not as specific as you’ve shown in your examples. You’ve given me a lot of food for thought, and I’ll be returning to your site often. Thanks!
Norman
Thank you for commenting, and I’m glad you found it helpful!
I started really making headway with my finances after realizing that a written plan helped me. Saying things like, “I need to save more money” or “I’ve got to spend less” never worked. But when I started really being specific with what I wanted to do, it was so much easier to actually do it!
Hey Janelle, I loved your post. First, I like how you covered all the requirements that’s necessary for saving up for retirement or so you can have a retirement fund of some kind.
Second, I liked your story about how you told your 16 year old about the difference between paying yourself and bills. Also, I want to go on record as saying that I’m going to save your post because it is a good roadmap to follow when I’m ready to start saving up for a retirement fund. Great job!
Thank you so much! I know how hard it is to struggle with everything in your life right now, and retirement can seem so far away. Between making a plan to save and starting my online business, I have now retired and get to spend my days enjoying our country life and taking my grandson back and forth to school.
I didn’t do a good job setting a good financial example for my girls when they were young. So I had to take a good look at my finances and money habits and make a lot of changes!
Good luck building your early retirement!
As far as I see, whether you will be able to retire early or not, is a psychological game. Are you capable of regulating your life more, and doing things a bit differently by canalizing your energies and financial resources towards a long-term goal?
It is a very tough thing for a human. If you had a computer in your head instead of your brain, it would be easier to always remain rational and calculate, but you have an organic brain with emotions, impulses and desires.
However, the techniques you’ve shared prove to be really effective. You can use them with success in this game against yourself.
The calculator is great. Thank you.
It can definitely be very difficult at times to have long term thinking about retirement when it seems like such a long time away. Years ago, you didn’t have to think about your financial future in retirement as much if you had a great pension and people stayed at their jobs much longer than today. It’s definitely a different world today, and everyone needs to plan much earlier in life for their future.
I’m glad the calculator was useful, and thanks for stopping by!
Janelle,
Love your post on 6 early retirement tips you can start today. My favorite is the make a plan part. I’m all about making a plan to accomplish something. Lots of people don’t create a plan to follow and I think it hinders them in achieving their goals.
My employer matches up to 6% on the 401k so you can bet I max that thing out. My wife and I are actually currently in the process of looking at houses to downsize. We’ve still got one daughter at home but that will only be a few more years. Our house is fine but we don’t need all the space and could use the savings on money. The side hustle part is awesome as well! I’m a big believer in that and am surprised more people don’t do something on the side.
Thanks for the great article!
Mat A.
I’m so glad you found my post helpful, and it sounds like you’re already on a great path to your early retirement! Starting a side hustle can be a lot of fun and make money in the process. So if there’s something you love to do or an interest that you have a passion about, there’s bound to be a way to use it to start yours!
Although I am young, I must say that I already tired of the corporate world. I want to work for myself and be able to retire early, in like my 40’s. Lol…
But I know that it will take hard work, patience and some time. AND A LOT OF SACRIFICE.
Thank you for your amazing tips! I will add them to what I am already doing to save. I already make use of my TFSA, I am making low car payments already because I did get a second-hand car. I pay myself first and I am trying to also get rid of bad debt.
What I also do, is always take cash to go and do the groceries, never my debit card or credit card. I find it is so easy to overspend with the cards. You don’t see your money being spent.
But with a $100 bill for example (for every week), I know I cannot go over and thus it helps me get rid of stuff that I really don’t need in my cart. And if I end up having change left, I dump it in a piggy bank for more savings.
It sounds like you already have a wonderful plan for keeping down your debt! Good luck with your early retirement goals, I have no doubt you’re going to achieve them!