Early retirement is more achievable today than at any other time in history. If you want to leave the workforce at an early age and spend the rest of your days living life on your own terms, here are four important steps you’ll need to follow to get there.
1. Decide When You Want To Retire
The first step in your plan is to set an age at which you want to retire. Pick an exact number. If you want to retire at age 40, then write that down as your goal and start figuring out what you’ll need to do to make that happen.
2. Determine How Much Income You’ll Need In Retirement
Many people focus on how much money they want in the bank, but this is not a realistic approach for most people. It would take an insane amount of money to retire, living only off the interest and dividends. Instead, determine your monthly expenses at the lifestyle level you want in retirement, and don’t forget to adjust for inflation. Some of the income will be from investments that you’ll need to liquidate, but you’ll want to have other passive income streams to provide the bulk of your monthly living expenses.
3. Increase Income And Lower Expenses Accordingly
Start moving in that direction immediately. To accelerate the process, you’ll likely need to downgrade your lifestyle, eliminate all unnecessary expenses and add additional income streams. Beside investing in stocks and bonds, you could also work a second job, start a freelance business on the side or invest in real estate to move you toward your income goals at a faster rate.