Becoming financially independent and retiring early is a major goal for many people. You may dream of leaving the rat race as soon as possible and either relaxing in retirement or having an independent source of income, but this journey can be extremely challenging.
If you want to retire early, you have to be dedicated and be prepared to live frugally for a long stretch of time. If you think you can handle this, here are the main things you’ll need to do.
Start saving early
This point seems like a no-brainer, but it’s worth repeating. All too often, people delay saving for retirement because it feels like such a long time away, but this means you’re just delaying your financial independence and making it harder for yourself to enjoy a high-quality lifestyle in your later years.
To maximize your savings, you should definitely start a personal pension in addition to your workplace pension. This will help you save as much as possible for your retirement, allowing you to finish working early. Learn more about personal pensions here.
Pay off your mortgage quickly
Your mortgage will be one of your biggest sources of debt, so if you want to retire early, you need to focus on paying it off as quickly as possible. This will be a huge commitment, so consider purchasing a house well within your budget and paying a large deposit to make it easier for you to pay off the mortgage quickly. Owning your own home is a key part of financial independence, since you won’t be stuck making mortgage repayments or paying off someone else’s mortgage through rent.
Although it’s hard to avoid all forms of debt, particularly mortgages and student loans, you should do your best to always spend the money you have rather than relying on credit. All it takes is a few unfortunate circumstances for your credit card debt to spiral out of control and for you to struggle to make repayments, so do your best to reign in your spending and save money for large purchases.
Have an emergency fund
Often, people find themselves in debt because they didn’t have an emergency fund to rely on. If you’re living paycheck to paycheck, a few unexpected bills can seriously mess up your finances and push you into debt, and once the interest starts adding up, it can be difficult to pull yourself out of that situation. Therefore, one of your biggest priorities should be to save enough money to cover 3-6 months of expenses, as this will be a vital safety net if you suddenly lose your income.
Maximize your earnings
Living frugally can definitely help you save more money, but if you reach a point where you can’t save money after covering your necessary expenses, you need to think about increasing your income. Finding a new job, asking for a raise, getting new qualifications, and starting a side hustle are all great ways to maximize your earnings.
Retiring early isn’t easy, but financial independence is certainly worth the struggle. Follow the advice in this article to take control of your money and earn your financial freedom.