Early Retirement Plan
In order to retire early, you must have a plan. Here is one fool proof way to do it.
Ages used in this article are not really relevant. They are simply for demonstration purposes. You can start at any age to change how you live and aggressively save and invest. If you want to be able to retire early, you have to have a plan. Early retirement means sacrifice, there’s no easy way around that. You’ll have to forgo luxuries today with the goal of enjoying them tomorrow. It’s not a lifestyle for everyone.
Get started young earning and saving. Starting at age 16, get a job. It doesn't matter what kind of job, just get one. On payday, bank every cent you have above your living expenses. Notice I don't say, "Bank every extra cent you have," because you never have extra money. Spend only what you have to spend and live below your means. At 16, you should be able to bank most of your pay.
Don’t put yourself in debt. People have told me that you cannot live without credit but that’s not true. You can live quite nicely without credit and you can also develop a credit rating without going into debt. By using a credit card as they should be used; making purchases and paying off the entire balance each billing cycle; you will have excellent credit and no debt. This takes tremendous self-control, however and you must always have the goal of early retirement in sight.
Live frugally, sacrificing today's wants for tomorrow's pleasures. Forego the VCR and the DVD player, sacrifice going to new movies. Pack your lunch and live in a cheap apartment. Believe it or not, living frugally is not depressing. Frequent the local used paperback store or flea markets; reading will serve you better in the long run than the latest blockbuster movie. You can buy any sort of paperback for as little as 25 cents at a rummage sale. The book will entertain you for a week but the movie will cost you at least five dollars and only entertain you for 90 minutes. When someone offers you free stuff; don't turn up your nose! The worst looking couch can be made attractive with a rummage sale throw.
While you are young, your earning potential is not at your lifetime high, but your earning ability probably is. What I mean by this is, a person in his or her 20's generally has more stamina and energy than people in their 40's. Take a second job and bank all the money from it. If you are not in school and are in good health, you can put in a 60-hour or better workweek. Bank any windfalls like tax returns; pretend you never got the money. Join employer-sponsored savings plans and start an IRA account.
Once you have saved enough to support yourself for 6 months without working, start putting your money into investments. You'll earn a higher return on your investments than you will on passbook savings. When you are getting started, make use of a discount broker for advice. But, all the while, be learning about investing on your own. Read the books and the web sites. Read the investment columns in the newspaper and keep up on the financial news on TV. You will soon know enough to start using low-cost online trading services. Set absolute limits on your investments. If you are doing day trading, for example, and your current holding is losing you money, set an absolute limit on what you are willing to lose. If you hit that mark, back out of the holding. Dump it. Better to cut your losses and live to play another day than to risk your entire account on a maybe.
Tough it out. The pay off in the long run will make it worthwhile. Make a dream book or a plan of what you want to do when you are able to retire and all those you know are still looking at 20 or 30 years in the work world. When urges to go on a big spending spree hit, (and they will) be prepared with a list of reasons why you don't want to do that. Stay focused on the goal. Living like this is not for everyone, but very early retirement is attainable. It takes a great deal of sacrifice, self-control and planning. The pay off is in being young and healthy enough to enjoy many years of retirement.