Almost everyone I know dreams of retiring as early as they could. They want to retire early so they could spend more time with their families. They want to retire early so they could spend more time doing that the things that they love. They want to retire early so they would never have to work for money again. These are just some of the reasons my friends told me why they want to retire early.
However, almost all of them think that retiring early is quite a far-fetched dream. They think that it is an elusive dream that can only be attained by the rich. However, I disagree. It’s not a far-fetched nor an elusive dream. Due to the advent of the internet, we are all getting exposed to the stories of people who have done it.
Here are the common strategies that these people (those who were able to retire early) implemented in their lives that we could also adapt in order to help us retire early.
Live within Your Means
If you are earning P100,000 a month and if you are spending P100,000 a month then there’s no way that you could retire early (and that also means that you’re still broke despite of the fact that you’re earning P100K per month). It’s not always about how much you are earning but how much you are saving.
“Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.” ―
Save as Much as You Could
A lot of people follow the 10% rule wherein they save 10% of their income on a monthly basis. However, if you want to retire early then you would have to save more than that.
Here are related articles from the web that could hep you draft a basic computation for how much you need to save for your retirement. Please note that since the computation is done in a different currency, you can just compute its equivalent in whichever currency applicable to you.
- The Motley Fool: How Much Do You Need to Save for Retirement? A Look at the 4% Solution
- Mr. Money Mustache: The 4% Rule: The Easy Answer to “How Much Do I Need for Retirement?”
- The Street: How Much Do You Really Need to Retire?
- Good Financial Cents: How Much Do You Really Need to Retire?
- CNN Money: How Much Do I Need to Save?
“Once you really accept that spending money doesn’t equal happiness, you have half the battle won.” –Ernest Callenbach
If you find it very difficult to save money then you might consider analyzing your monthly expenses. One of the major monthly expense of every individual and family is the rent. If you are single and if you are renting a two-bedroom apartment then you might want to think about moving to a one-bedroom or a studio flat.
If you own the place and do not want to leave your apartment, then consider renting out your unused bedrooms. This will help you earn and save money by having someone rent your spare bedroom on a monthly basis. And depending on your arrangement, you could also ask them to split the cost with the utility bills such as electricity, internet and water.
“I’d like to live as a poor man with lots of money.” –Pablo Picasso
Save Money from Your Utility Bills
You’ll be amazed on how much you will be able to save by doing some basic utility expense-saving techniques:
- Turn off the lights when you’re not using them
- Set your aircon on a timer so it wouldn’t have to run for the whole night
- Turn off your TV before you go to sleep
“He who will not economize will have to agonize.” –Confucius
Skip that Expensive Cup of Coffee
It’s time to stop buying that expensive cup of coffee on a daily basis. If you are spending P180 a day for a large Frappe then that amounts to P5400/month or P65,700/year. It’s a huge chunk of money that you could use to add to your emergency fund or invest on stocks.
I love coffee, I really do so what I usually do is I brew my own coffee at home. At work, if I want coffee, then I just go to our pantry and get the available free brewed coffee. If your office does not provide a free coffee, then you might as well bring your own. There are many thermal bottles available in the market that you could buy to help keep your coffee warm for a period of time.
Buy from Thrift Stores
Thrift stores nowadays do not only sell used clothing items but as well as brand new ones. With the advent of “fast fashion” a lot of “past season” clothing items are now ending up in the dump sites and some in thrift stores. Buying from thrift stores will save you a lot of money as the price of clothes in thrift stores is way more cheaper in comparison to the mall retail price.
Thrift stores are also the best place to find vintage clothing, unique pieces and even designer goods (if you know how to authenticate). I love thrifting. Almost all my clothes are bought from thrift shops.
“Thrift is the best means of thriving.” –Charles J. Hare
Do not Buy What You Cannot Afford
If I cannot afford to buy it in cash then that means that I cannot afford it. Do not give in to the 12 months 0% instalment promotion of your credit card. It is so easy to think that a P30,000 mobile phone only costs P2500/month. Do not fall for that marketing trap. The gadget that you will buy on that instalment scheme means that you will be in debt or 12 months.
Ask yourself, is it worth going into debt for a year just to be able to have that phone?
“There is no dignity quite so impressive, and no independence quite so important, as living within your means.” ―
Build Sources of Passive Income
If you are a millennial then consider yourself very lucky. The information about almost anything is freely available online and it’s so easy to setup sources of passive income online. If you are not that young anymore then worry not as you still could take advantage of the available technology. Start learning and experimenting on how to earn passive income now.
I will write a separate post about this because this is a very broad topic to discuss but to give you some basic ideas on how people online, here’s a list on how they do it:
- Affiliate Marketing
- Creating Youtube Videos
- Offering Services/Freelancing
- Selling Online
“If you are wealthy, think of saving as well as getting.” ― Benjamin Franklin
Investing your money is one of the best ways in accumulating wealth. There are various forms of investments available to all of us. I highly suggest though that before you invest on anything, build your emergency fund first. And while building this fund, start learning abut investments. There are tons of information available online when it comes to investing in stock market, mutual funds, etc.
“Compound interest is the eighth wonder of the world. He who understands it … earns it … he who doesn’t … pays it. ” ― Albert Einstein
I will leave number ten to you guys. Feel free to share your strategies in building your wealth on the comment section below.