Who doesn’t want to do better financially and retire as young as possible? If you’re one of those folks, you’ll want to keep reading to learn how to stop working at a younger age.
Once you learn the tips highlighted below, you also may want to think about hiring a Chartered Financial Analyst (CFA) to handle your wealth management. CFAs must study for several years and take a rigorous CFA examination to earn this designation, so few finance professionals are better qualified to manage your money.
Get Paid Well And Spend Less Than You Make
This sounds simple, but many of us struggle a lot with this rule. It’s important to know what your skillset is worth in the marketplace. If you are underpaid by just $1,000 a year, that adds up to tens of thousands of dollars over your lifetime.
And no matter how much you earn, you’ll never retire if you spend more than you make. It’s often easier to cut your spending than to make more money. You only need to do some cost-cutting here and there to save hundreds or thousands of dollars per year.
Keep A Budget And Stick To It
A vital step to take when you want to retire early is committing to a budget. After all, how will you know where the money goes if you don’t have a budget? How can you establish saving and spending goals if you don’t manage your money?
It’s essential to establish a budget no matter if you make $1,000 or $100,000 per month.
Set Up A Savings Plan
‘Pay yourself first’ is a cliche, but it’s true if you want to retire young. If you wait to save money until you meet all of your financial obligations, you’ll probably never have much in savings or investments.
Many experts recommend putting aside at least 5% of your salary per month for savings before paying any bills. Even better, have the money taken from your paycheck and put into another account.
Put Money In A Retirement Plan
If your company has a 401k plan, invest as much as you can afford from every paycheck. Many employers will match your 401k contributions dollar for dollar up to a certain amount per year.
If your company doesn’t have a 401k, you should set up an IRA on your own.
Take Full Advantage of Employment Benefits
Whatever your company offers – 401k, flexible spending accounts, health insurance – make sure you take advantage of them. Together, these benefits are worth thousands of dollars per year. When you use these benefits, you can save cash by reducing your taxes and/or out-of-pocket costs.
Pay Down Consumer Debt
Credit card debt is the biggest obstacle to retiring early and doing well financially. Those plastic cards are easy to use, but it’s serious money you’re spending, and the interest rates are usually high.
Many people need to pay off their credit cards and never use them again because they are so easy to abuse.
If you have consumer debt, resolve to pay the accounts off, starting with the highest-interest account and working your way down.
Don’t Withdraw Money From Your Retirement Accounts Early
It’s tempting to take money out of your 401k when you have a lot of cash in there. But the longer you have your assets invested, the more money you’ll earn.
Also, if you take money out before age 59.5, you’ll have to pay a 10% penalty, plus regular income tax.
You shouldn’t need to take money out of your retirement accounts if you have established a savings plan and budget anyway. People with ample savings don’t need to pull money out of their 401ks or IRAs.
If you stick to the above tips, you have an excellent shot at retiring early and enjoying life, so do your best!