Are you thinking about retirement in your near future? Or maybe you want to retire early. Either way, there are some steps you can take now to help you on the road to retirement. As I’ve followed these steps over the last 5 years, I’m now in a great position to retire early and live life ‘working’ on my own terms. It’s a great feeling to be financially independent and feel financially secure.
Step 1. Make retirement your goal and create an action plan.
Planning for retirement, especially early retirement, requires you to make changes in your life to ensure you achieve your goal. If you don’t create a specific action plan, you have a greater chance of failing. The steps I outline below will help you develop your own action plan that fits your lifestyle and timeline.
Step 2. Track your income and expenses.
You need to understand your current financial situation in order to determine how to best meet your goals. Tracking both your income and expenses is a great way to find out where your money is coming from and going to. There are a lot of different ways for tracking your money whether it’s an online tool like Personal Capital, budgeting software, an app, or manually using a spreadsheet. I’m a finance and accounting nerd, so I like to track my expenses online and track them myself using a spreadsheet. (I don’t recommend this because it’s a lot of extra work, but I love finance and working in excel, so it’s a fun hobby for me!)
Step 3. Trim your expenses.
Since you expenses are more in control than your income, taking hard look at what you spend every month will help you spend less and accelerate your savings.
Saving more and spending less often requires you to make lifestyle changes. You can cancel your cable, take public transportation, get a roommate, shop at thrift stores, cut your grocery budget, and utilize your local library. Making a couple small adjustments will kick start some new savings habits.
Step 4. Continue to track your income, expenses and savings.
Finding a way to tracking your finances that works for you is important in order for you to stick with your goal. Tracking consistently allows you to see patterns of spending over time. It also gives you a good picture of where you are, makes you challenge yourself to save more, and provides a constant reminder of the commitment you made to your road to retirement.
Step 5. Find new ways to make money.
If you take some time to look, there are numerous ways to increase your earnings. Whether it’s a promotion or raise at your current job, or finding a side gig to make some extra bucks. Ask for feedback and suggestions from friends and family. Those closest to you can help give you ideas on passions to pursue and skills to learn to increase your future earning potential. Discover what you are passionate about, and you will learn to find a way to make money doing it.
Step 6. Read and learn
Educating yourself on personal finance topics can not only be really helpful for picking up new tips, but it can be fun and addicting too. I love reading everyday, both fiction and non-fiction books, as well as current news stories. Make it part of your action plan to read one new personal finance or motivational book every month. My 3 favorite personal finance books are The Millionaire Next Door, Your Money or Your Life, and Total Money Makeover.
As for motivational books, I recommend Eat That Frog and anything by Gary Vaynerchuk. Although they aren’t focused on personal finance, they are really helpful to keep you motivated to achieve your goal. The most successful people read all the time, so why don’t you pick up the habit for yourself!
Step 7. Don’t change your lifestyle.
When you experience an increase in your income, don’t increase your spending. Too often people feel the need to spend more when they earn more – trying to keep up with others in their age group and/or their earning group. We see what other people have and we want it too. The one I see way too often is people moving into bigger and ‘better’ homes. This is the biggest expense in your monthly budget and can have a huge impact on your spending and savings goals.
Don’t give in to these temptations! Instead, be happy with what you have and stick to your current lifestyle and spending patterns, and you will see your savings soar.
Finally, repeat as necessary. Living below your means allows you to save consistently for your retirement goals. Now, make a commitment to make some changes to achieve your retirement goal.
Write it down! Tell others your plans! Stay committed! Enjoy the journey!
Do you have any financial goals that you are trying to achieve? What methods are you using to help you get there? Please share your thoughts in the comments!