Leaving the Corporate Life Behind
I ran across this fabulous post over at My Dollar Plan
So, let’s talk about this list a little and see where everyone is in terms of early retirement. By the way, I’ll be skipping a few of her steps because I just don’t want to get into the logistics of it.
Step # 1 - Start Saving Early
It’s best to start saving as soon as possible, obviously. But parents don’t always teach their kids at an early age, so sometimes the savings comes too late in life. My Dollar Plan says she started her first IRA at 16….16, can you imagine? I wish that I had had the know-how to start an IRA at 16! But, even still, starting a savings account of some kind in your 20s is far better than waiting until your 30s and 40s.
Step # 2 - Save, Save, Save
You can’t expect to retire early if you don’t make it a priority and be aggressive about it. You have to make it a priority, even if you have debt. Obviously, if you have no debt, you can save more. The key is to find a balance that makes sense for your current lifestyle and debt ratio. At the very least, you should be contributing to your 401(k). At minimum, you should be contributing to what your company matches - otherwise you’re throwing perfectly good money away.
Step # 3 - Work The Tax System
This is a good one that often gets overlooked. If you’re getting a big check back at tax time, then you’re deductions are off and you’re lending the government money, tax free. Think they’d return the favor? Not likely. So, become familiar with the tax system, find deductions that you can take, and use them to your advantage. Try volunteering during tax season to learn more about the system.
Step # 4 - Keep Your Accounts Organized
I have a member at the credit union who has something like 20 accounts and she can never keep them straight. She comes in at least twice a month to have us help her balance her checkbook and after six months, I finally took a stand. I simply told her that if she couldn’t keep track of her accounts on her own, then we weren’t going to continue balancing her book for her. Technically, we will help people balance their checkbooks, but it’s a $25/hr charge. We’ve been doing it for free. I told her we’d start charging her if she continued to come in requesting our help. She closed down many of her accounts and, not surprisingly, she was able to balance her checkbook all by herself. So, the lesson here is that you have to keep track of your own stuff. Don’t expect anyone else to do if for you. When you keep track, you can save yourself money, catch missed opportunities for interest, and just have better finances in general. Having an orderly financial record will help you on your way to early retirement.
Step # 5 - Maximize Tax Advantage Accounts
These types of accounts allow you to save money on taxes or defer them to when your taxable income is usually much less. So, take full advantage of them. If you’re unsure of your options currently, be sure to speak to a financial advisor.
Step # 6 - Imitation Is The Best Form of Flattery
In other words, learn from those who’ve done it before you. Visit online forums of people who’ve retired in their 30s and see what they’re doing. Read books and study the actions of those who’ve made it happen. You’d be surprised what you can learn, and you may even pick up a little gem that helps you reach your goal - even if you’re not in your 20s or 30s.
Step # 7 - Know Your Value
When it comes to your income, don’t necessarily settle for what’s being offered. Know what someone of your skill level should be paid and work on negotiating a higher salary. Don’t be afraid to ask for more money, just present a strong case when you take it to your boss!
Step # 8 - HAVE FUN!!!!!!
Just because you want to retire early doesn’t mean you have to live like a penny-pinching scrooge! Take vacations, live it up a little, and enjoy life. Just set yourself a reasonable budget that let’s you have a little fun without being excessive. Moderation and creativity are the keys to fun vacations and good times around your own town.
Step # 9 - An Education Is Important
A college education, while not always necessary, can certainly open more doors for you - particularly if you’ve hit a ceiling. My dad is facing this right now. He’s had a Bachelor’s degree for a little while, but apparently, the position he wants requires an MBA. So, at almost 50 years old, he’s pursuing his MBA. It’s never too late to go back to school, it just gets a little more tough the older you get. But, don’t make the mistake of taking on more debt than you can manage.
Tip # 10 - Set Goals
If you want to retire early, that’s a goal. But, it’s a big goal that when looked at from the big picture perspective can be a little overwhelming. Instead, make smaller goals that are more manageable to help you achieve the little goals. For example, My Dollar Plan made yearly goals about the amount she wanted to save every year in order to meet her early retirement goal. If it feels too complicated, simplify it.
Tip # 11 - Follow Up On Goals
If you set yearly goals, but sure you follow up every year to make sure you achieved what you set out to do. It’s also a good idea to reevaluate your goals every year just to be sure that you’re on track. Once you’ve reevaluated your goals, look over your portfolio and ensure that it’s meeting your needs.
Tip # 12 - Stick It Out
If you make it your goal to retire early, then do it. The only thing standing in your way is yourself. Sure, there are obstacles, but you have two choices. Either jump on the negative bandwagon and give your mind every possible reason you can’t do it so you talk yourself out of it, or you jump on the positive bandwagon and find creative solutions to problems in your way. I’ve said before that Dr. Randy Pausch had some financial advice in his ‘Lat Lecture,’ and here’s a good example. The obstacles are in our way to show us how much we really want it.
Tip # 13 - Follow Your Passion
Here My Dollar Plan talked about early semi-retirement whereby she made some side income for doing what she loved. No one says you can’t work in retirement, in fact, many people choose to. But, while some HAVE to work, those who planned appropriately for their retirement are only working because they want to. When I completely retire from the corporate world, I want to live on a beach - not during hurricane season, though - where I can step out into my backyard and write until my heart is content. But I want to write what I want to write, which is fiction. While I love freelance writing, it doesn’t offer the same tranquility and longing as fictional writing. So, I’m all about following your passions.
Tip # 14 - Make A Plan With Your Spouse
If you’re married, or getting married, you’ll need to decide if you’re leaving the workforce at the same time, or if you’ll stagger it. You’ll also need to determine what role each partner will have in either scenario. For example, if one retires early and the other continues to work for several more years, will the household choirs still be divided, or will the one at home have a little more responsibility to them? It’s best to decide these things ahead of time so neither party feels unappreciated by the other.
Tip # 15 - Make It Visible
Write it down and stick it on the fridge. Make it a constant reminder that you can and will achieve your goal. Having that reminder constantly keeps it on your mind, consciously and subconsciously, allowing the brain to consider options, alternatives, and solutions to problems as they arise. It makes it that much easier to achieve the goal. Besides, you don’t want to let the nay-sayers get you down.
Tip # 16 - Think Outside the Box
When it comes to savings, making a little extra money to stick in your accounts adds up. Sometimes your checks are just enough to cover the bills or an unexpected expense comes up that puts you behind schedule (because you don’t have the emergency fund!). Well, think outside the box. Consider things like bank IPOs, stoozing, selling your plasma, whatever creative ideas you can think of to earn a little income, but that aren’t a complete waste of time. Note: those online surveys can be a waste of time. While they’re not all a bunch of scams, the demand is much higher than the supply, so if you’re trying to break in, you could be spending time on a lost cause. Consider your options carefully before making a decision.
Tip # 17 - Learn From Your Mistakes
No one has all of the answers and we all make mistakes. The key is to learn from them and move on. Don’t dwell on things you can’t change, just move on and aspire to do better the next time around.
Tip # 18 - Expect The Unexpected
Emergency Fund!!!!! I cannot stress this enough and I know there are those of you out there who don’t think this is a necessary asset, but it is. Especially if you want to retire early. What’s the point of saving for retirement if you’re just going to use the money when something unexpectedly comes up? The two need to be separate…stop dipping into your retirement!
Tip # 19 - Plan Your Exit
Make sure you leave gracefully, that’s number one. No one ever knows what the future may bring and if you ever decided you need to come back, you’ll need your bridges still intact. But, aside from that, when the time is right, you’ll need to make preparations. My Dollar Plan gives you an additional 43 steps to take to prepare you for this point…by the way, she’s got a ton of other really good lists that branch off of this one. Are you beginning to see why I love it so much?
Tip # 20 - Don’t Look Back
Change is hard, but when you make the decision to leave, don’t look back and wonder ‘what if.’ Stay firm with your plans and give yourself a little time to adjust. There will be a transition period, but just think of all the things you’ve been wanting to accomplish and didn’t have time to do. Try sleeping in or going for a walk, whatever helps you with your transition. Just keep reminding yourself that you’re RETIRED!
Ok, I only put 20 of her 29 tips on here. Mostly because it’s a long list and I didn’t want to type them all out. But, the other part of that is that some of her list is really better left to her to describe. I’ve done the vast majority of these tips on this list and I’ll be checking out some of her other lists, too. My goal is to retire by the time I’m 40, though with this list, I may revise that to 35. We’ll see.
I’d say I’ve got a fairly good start for myself because I don’t have debt. So, for those of you with debt, you’ll want to focus on paying your debt off first. Well, actually I say your first priority should be an emergency fund, even if it’s a small one, and the minimum employer-match contribution to your 401(k). Then, pay off your debt. Once that’s done, you’re free to hit the savings as aggressively as possible.
So, where are you? Do you have plans to retire early? If so, how are you doing? Will you make your goal or has the current financial situation pushed you back a little?
What’s the best way to “retire at 29″ simple, write a best selling book about retiring at 29 the the royalties should give you enough money to retire on.
This is more or less what is more or less what Derek Foster of stopwork.ca did. Retired at 34 then went on to write 3 best selling books. The problem with his first book was the math doesn’t work out. According to his book he worked at a low paying job and put 200 a month into investments and vola he retired 12 years latter with 2 kids and paid for house.
What’s missing, well the fact he got a large inheritance, bought a house cheap at the bottom of market (up probably 250% since then) used leverage and bought into the beginning of a massive bull market (energy income funds) and oh yeah, wrote several best selling books.
Obviously he was a very frugal person who avoid the debt trap but still you can’t hope to retire in 12 short years using his method.
It’s the same with those “how to retire in 5 short years” pure luck. The best and only guaranteed way to financial freedom (and not necessarily great wealth) is to have a good paying job and live well below your means.