Ever hoped to exit the rate race and retire early? Ever wanted to go on vacation... forever? How would you provide for yourself anyways? No matter how hard you might try, the “job” always seems to pull you back into its grasps, right? Is there a way to change your fate and not have to trade your personal work for money anymore?
The secret to having sufficient money to retire early is to increase your income and reduce your expenses. This may not be as seemingly impossible as you might think. All it takes is some discipline, some desire, some wise decisions, and a few tips.
1) Live Frugally
Live within your means... without chasing after useless things that will just end up in a garage sale. Cook your own meals instead of regularly eating out. You will be taken aback at how much money you will have conserved.
2) Reduce Your Expenses
Be cognizant of your cash outflow. Keep a record of your expenses and compare them to a pre thought out budget. You must commit to managing your common expenses if financial independence is your goal. Do you actually need the most expensive option for cable? Do you really need yet another pair of shoes?
3) Get Out of Debt
When you reduce your regular expenses, you will free up some cash for other things. Increase the payment on your credit cards with your extra money. Start with the credit card with the highest interest rate. This will quickly reduce your interest expense, and it is similar to earning your credit card’s interest rate on your own money, since you no longer have to pay them that interest payment.
4) Save For Your Retirement
Once you start repaying your highest interest rate credit cards, there will be an even more significant increase in your excess monthly cash flow. Start putting that money into investments that can generate additional cash flow. It is most helpful to find investments that are scalable, so that you can add more funds to them at will, and have your next dollar earn the same return as the previous dollar. Make money your best worker, don’t be a servant to money.
5) Invest In Your Retirement
Try to find investments where you can take risk out of the equation soon, while making a favorable return. The main risk to manage is risk of loss of investment principle. As soon as you’ve removed your original investment principal from the investment, you’ve effectively removed that risk from off the table and your money in that account is now growing for you essentially risk free.
6) Have a Goal For Your Retirement Date
What the mind can conceive and believe, it can achieve. Your main financial levers for getting there are 1) the amount of investment capital you are using and 2) your return on your investment. When planning, start at the end and work backwards, to calculate how much return you think you’ll need to get, and how much money you’ll need to start with. Can you get only 5% return or can you get a 60% return? Can you leverage $100k of other people's money, or must you only work with your own savings? Once you know those two factors, you can then start looking for ways to gain access to that amount of capital and generate that target rate of return.
7) Control Your Retirement Expenses
If you have your house and cars completely paid off, you might not actually need very much cash flow in order to retire early. This is especially true if you retire in a place like Panama. You can live very comfortably there, on a modest budget. The more residual income you’ve been able to build, the more places you can live, for whatever length of time you like. This is financial independence. By following the above plan you will be amazed at how much you passive income you can actually generate.
By adhering to a reasonable budget, you will see a drop in your common expenses and an increase in your monthly cash flow. Then use that extra cash to rapidly lower your debt expenses. Always set aside something for investing. Establish your retirement goals by beginning with the end in mind. Stick to living within your means and financial freedom will become your reality.
Author Resource:-
Steve Silverton is with http://TheFinancialFreedomFoundation.org , a non-profit that guides people to achieve financial independence by learning and correctly applying specific, focused investment concepts. They have a very insightufl FREE REPORT found on the home page of their website.
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