By: Steven Vulpis In a survey with over 600 millionaires, many of them said one of the main keys to their success was spending below their means. The FIRE movement is a growing trend among millennials aimed towards an early retirtement. FIRE stands for “Financial Independence, Retire Early” and ...
By: Steven Vulpis
In a survey with over 600 millionaires, many of them said one of the main keys to their success was spending below their means. The FIRE movement is a growing trend among millennials aimed towards an early retirtement. FIRE stands for “Financial Independence, Retire Early” and many who take part in this save over 50% of their income to retire in their 30s. In one specific case, a New York City lawyer who makes $270,000 a year lives in New Jersey to avoid high taxes, owns a total of five suits for the work week, doesn’t turn the heat on during the winter, lives off rice and beans, and saves over 70% of his income. At the age of 36, he is set to retire in three years. While most people do not have an income that high, or simply are not willing to sacrifice their current lifestyle to that extreme, that does not mean that you can’t work towards an early retirement.
Frugal living does not mean being cheap. It means coming up with a plan for your money, buying what you need and saving the rest for your future. The first step towards early retirement is to pay off any debt you owe. Whether it be student loans, credit card debt or any other debt it is important that you put extra money towards your debt payments. When you are debt free, you can then start saving and investing money towards your future. Another key is to look for a second form of income. Pick up night or weekend shifts at a restaurant, deliver pizza or do anything else that will add another stream of cash into your wallet. While it may be an inconvenience to you now, this extra money can be used to help pay off your debt, or it can be invested to turn into more money in the future.
One thing you should do is build an emergency fund. This fund should be used in situations such as one of your household appliances breaks or your car needs some repairs. The reason that this fund is imperative is so that you will not have to incure more debt to solve these problems. If you are able to spend cash, you will save yourself having to pay interest down the road.
Another key aspect to frugal living is meal planning. Write out your weekly meals so when you go grocery shopping you avoid extra purchases that will go to waste. You should also consider making your lunch the night before. Instead of forcing yourself to wake up earlier than you have to and make your lunch for the day, prepare it and refrigerate it the night before. By doing this, you are getting extra sleep, as well as cutting down costs on buying lunch if you forget to make it in the morning, or overslept and don’t have the extra time.
All of these steps can you help you save more, but how can you turn extra savings into an early retirement? The first step is to find how much money you will need to have saved before you can retire. It is recommended that you have 25 to 30 times your annual expenses invested or in a savings account, while having an additional years worth of expenses in cash. Once you have your target number there are many things to do to reach it.
One thing you should do is to max out your retirement accounts. In 2019 you can put up to $19,000 into a 401(k) and up to $6,000 in an IRA. The more money you put into these accounts now, the more you will have in the future. If you still have money leftover after maxing out your retirement accounts, you should look to invest elsewhere. Low cost index funds are commonly used by those saving for retirement as they provide low risk to the investor and diversify your money. There are many ways you can invest your money to gear up for an early retirement.
The key to achieving your early retirement is to save money where you can, and take that extra money and turn it into more money in the future.