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Retiring Early: Unlocking Financial Freedom Sooner

Unlocking Financial Freedom Sooner

If you, like so many young people today, are dreaming about the freedom and independence of the life of an early retiree, there are some questions you are probably asking yourself. How much savings do you really need to retire early? How come people doubt that even a million dollars is enough to provide for an early retiree for the rest of their life? And where do you even begin to plan for an early retirement?

For all the motivated dreamers out there, we’re here to help. In this article, we will take a look at actionable steps you can take to help position yourself for a successful and happy early retirement. We will share tips to consider and tools to use so that you can move forward with confidence into the freedom and financial security of your early retirement. Let’s dive in!

Craft Genuinely Helpful Budgets

Careful planning is key to attaining the freedom of a financially stable early retirement. As you set about crafting your budgets, there are a few things you’ll need to consider. Create a mock-up of a potential retirement budget, keeping in mind your current age, prospective retirement age, and a generous life expectancy projection. 

Then assess your financial situation now. Create a comprehensive picture that takes into account your income, current assets, and all expenditures, including seasonal expenses, such as an annual summer vacation. You should also consider the cost of living where you live; residing in an expensive city like New York or Los Angeles will have an impact on your budget, but can still allow you to save if you know what to look out for. 

Include a certain percentage of contingency costs as an emergency fund to take care of any unexpected expenses in the future, such as costly medical procedures, home remodels, or other expensive situations. Then take a realistic look at your current lifestyle. 

Where can you cut out expenses and maximize your income? If your budget shows that you are spending a high percentage of your income on eating out at luxury restaurants, for example, then you might want to intentionally cut back on this habit to contribute more to your early retirement savings fund. 

Maximize Your Savings

Starting early with a little can lead to huge savings in a matter of years. As financial reports reveal, if you invest just $50 per week starting from age 25, by the age of 65 you will have over $550,000 due to compounding interest benefits. But for young retirees aiming to retire before the age of 65, there are ways that you can maximize your savings to boost your revenues early. 

For normal retirees who are unlocking their savings accounts after age 65, it is wise to follow the 5% rule. This rule has retirees spend no more than 5% of their total savings accounts each year. 

For early retirees, you’ll want to focus on bulking out your savings instead. So you will want to follow the 25 rule, which stipulates that you should save 25 times as much as your yearly expenses. You can discover the target number by finding your total monthly expense amount. 

Then multiply this number by 12 to reveal your annual expense amount. Once you multiply this number by 25, you will have a good estimate of the amount of money you will need to save up for your early retirement. Adjust your budget and review your investments to determine when, how, and whether you will be able to meet this target goal.

Streamline Your Finances: Tools for Better Money Management

One of the benefits of living in the digital age of today is that we have more tools available to us than ever before. Embracing the power of the digital money management tools available to you can allow you to streamline your finances and easily keep track of expenditures, savings, and financial projections. So the right digital tools will help to position you for early retirement success. 

In order to expedite your path to early retirement, it’s crucial to streamline your financial planning. Start by digitizing important financial documents, making it easier to keep track of your expenses and plan your savings. A reliable DOCX editor can be invaluable in this step, allowing you to edit, save, and share your financial documents with ease. From setting up monthly budgets to archiving investment papers, a reliable editor will simplify your financial management tasks and let you focus on more important aspects of financial planning for your retirement. 

There is a broad variety of fintech innovations that can also help support your financial planning. Look for tools that provide real-time updates on the stock market to help you track your investments and manage your investment portfolio. 

Capital tracking apps can allow you to create and update your budget on the go, follow your spending habits, and automate your bank account and credit card balances. The best finance trackers provide you with a comprehensive up-to-date overview of all your financial assets in development, including your retirement accounts and any investment accounts or assets.  

[Related: How Incorporating AI Into Learning Now Leads To Financial Freedom Later]

Smart Investment Opportunities For Early Retirement

One of the best ways to provide yourself with passive income streams that continue to generate value even after you have retired is to make smart investments. With the right investments and a diversified portfolio, you will be able to quickly reach your goals and enter a happy early retirement. 

Consider which types of investment will best suit your personality, lifestyle, and retirement needs. Investing in real estate can provide your beneficiaries with a valuable asset down the line, while also providing you with value that can contribute to your comfortable retired life in years to come. 

Look for low-risk, high-return investments that can offer security with minimal risks. A Roth IRA account, municipal bonds, and index funds are a few options that can bulk out your diversified portfolio, providing you with various types of passive income-generating assets. 

Investing in a retirement bridge account, meanwhile, provides benefits for early retirees who may not have the funds to open a large investment account at a bank, but who are seeking out the benefit of high returns on the investments they do have. This type of investment account is named a bridge account because it “bridges the gap” between high-cost investment accounts and typical savings accounts. 

Final Thoughts

The path to early retirement may not be the easiest one, but with some careful thoughtful planning ahead, you can achieve financial freedom and independence. Take a look at your current finances and lifestyle to figure out where you are now and where you are trying to go. Calculate the right target amounts to aim for in your early retirement savings accounts. 

Utilize all the financial planning and money management tools available to you, so you can benefit from the tech capabilities out there today. Invest wisely in a variety of asset types so that you have a broad base of financial resources to draw upon as your retirement progresses. With some clever planning and savvy lifestyle adjustments, you will be ready to embrace the beauty of an early retirement with security and peace of mind that will last your whole life. 

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We uphold a strict editorial policy that focuses on factual accuracy, relevance, and impartiality. Our content, created by leading finance and industry experts, is reviewed by a team of seasoned editors to ensure compliance with the highest standards in reporting and publishing.

Financial Research Analyst
Kiara Taylor is a financial writer and Research Analyst. She is an expert at risk-based modeling having worked in the finance vertical for the past twenty years. She has a Master’s Degree in Finance from Ohio State and has worked at Fifth Third Bank, J.P. Morgan and Citi in emerging markets and equity research.

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