Thursday, February 6, 2014
Many people seem to believe that early retirement is now an unachievable financial goal, but it can be possible. Here’s a seven-step process to plan for early retirement:
- Assess finances. Figure out your net worth by estimating the value of your home and adding the value of financial accounts, cars, jewelry, furniture, etc.
- Track spending. Start keeping track of every dollar you spend so you can discover where to reduce expenses.
- Save! As a guideline, saving 25 times your annual spending should be enough for investments to generate the right amount of income.
- Invest wisely. Consider index mutual funds for a reliable way to invest.
- Resist pressure. Early retirees need to resist the pressure to budget for items such as replacement cars, roof repairs, and long-term-care costs.
- Live simply. Stop spending money on stuff and start using that money for experiences.
- Don’t get sidetracked. Don’t delay your retirement by overspending, ignoring your retirement funds, or succumbing to peer pressure.
See Andrea Coombes, 8 Secrets for Success from Early Retirees, Market Watch, Feb. 8, 2014.