Many people yearn to get out of the rat race and retire early. Is it a dream or is it indeed a possibility? The fact is that some folks manage to do just that. Furthermore, they retire young without being born with tons of money or a massive inheritance. So how do they do it? Listed below are five time-tested disciplines that you can put in place to quit working early and enjoy a fuller, more rewarding life.
Pay Yourself First
This is often cited as the first adage for financial well being. Pay yourself first means that you never write a check or spend a dollar until you siphon off a specific percentage of what you earn into your personal nest-egg savings and investments. Many personal finance advisors cite the "Ten-Percent Rule" as the correct amount to take off the top. In actuality, everyone's situation is different. Some can do much more.
Dedicated Savings and Investing Accounts
Most financial advisors recommend opening accounts which are dedicated to building up your nest-egg. The first one to open is a bank savings account that is funded with three-month's worth of living expenses in case major expense come up. Next, open up a brokerage account with a well-known financial company. You will use this to make investment in stocks, bonds, real estate and mutual funds for your future retirement needs. Review articles such as this one will help you find a good firm.
Harness Multiple Streams of Income
Most folks who have been able to retire early have relied on the generation of multiple streams of income to build up their nest egg. According to a recent Forbes article, the three key multiple income streams most early retirees focus on are stock market investments, real estate investments, and business ownership.
Passive Income is King
Try to generate at least one stream of passive income. What is this passive income thing? It is an income that you don't have to work for. Your investments or businesses generate it for you, even while you sleep. Owning a portfolio of dividend paying stocks generates a stream of passive income. So does the creation of a website in which you place ads from which you derive income every time someone click on them.
Be Frugal but not Cheap
Realize that you can control your spending. Buy things you need but keep away form high-cost items that you want but don't need. Craft a household budget and make sure your spending is not out of control. Shun debt as much as possible. If you own a credit card, pay the balance off in full each month. As you do this you will realize that you can likely contribute even more toward your retirement savings and investments. Do so.
Cultivate Lifelong Learning
This discipline may seem out of place here. But it's not. Always learning about new things, trends and ideas not only keeps your mind active but it can provide food for thought for generating additional streams of income. For example, say you develop an interest in collecting US gold coins from the 1800's. As you become an expert in your new-found hobby, you begin to design and construct a website through which you buy and sell gold coins for a profit. Incorporate these disciplines into your lifestyle. Your financial life will take a big turn for the better. Over time, you may come to realize that you can retire because you don't need to work anymore if you choose not to. Jump to top
