How to Retire Early – The Basics
PEOPLE always ask me how they can retire early and gain financial freedom. Well, this is a quick guide on how to kick-start your dream. Think of them as financial life hacks.
I’ve been following these simple rules for years and they’re helping me towards my goal of becoming a millionaire. This is how you can start your journey…
• Cut your spending (Don’t buy stuff you don’t really need)
• Pay off debts (Start with highest interest rate first. Don’t overpay mortgage if rate is below 4%)
• Bank 3-6 months of salary in an emergency fund. (High interest, instant access account)
• Save 50% of your salary (If you can live on half your income you can retire after 17 years. Save 65% of salary and retire in about 10 years)
• Increase your income (This is the hardest part, but even a little extra will give a better standard of living)
• Open a tax-advantaged account (In Britain this means a stocks and shares ISA)
• Within this account invest your cash in a low-cost global stockmarket tracker (I like the Vanguard Lifestrategy funds. I’ve got the 80% shares version which has 20% bonds. More bonds should mean less volatility but too many will probably reduce returns over the long term)
• Pay into a pension (Especially a work pension. If your employer matches a certain amount of the money you put in, this is a no-brainer because it is free money!)
• Don’t give up!
PS. I’ll go into more detail on each of these rules in future articles. This is just a checklist to get you started.