How Much Do I Need to Retire Early?
Most people think that the life goal of retiring early is not attainable, especially during current times when the income is meager while the expenses seem to spiral out of control. Some people even believe that they won't be able to retire at all as they are unable to save anything from their income.
If you also think in the same way, and wonder “how much do I need to retire?” you have stumbled upon the right place. Here you will learn the secret formula on how to retire early even when you have low income.
The Secret to Early Retirement
Early retirement is possible for anyone. You just need to have enough savings in your account that will last you throughout your retirement. In order to determine how much you need to retire, you should know the answer to the following two questions:
- How much is your annual income and expenses?
- Is it possible to cut down the annual expenses, or increase your savings?
The answer to the above two questions will determine the amount you will need to save to retire early in life.
How much is your annual income and expenses?
Knowing about the annual income and expenses will allow you to determine your present saving rate. The existing saving rate will determine the number of years it will take to save enough so that you can retire. Higher saving rates will obviously allow you to retire earlier. So, you need to focus on increasing the saving rate to ensure that you retire at the age you planned initially.
Is it possible to cut down the annual expenses, and increase your savings?
The next thing you need to focus on is how to increase your savings. You can boost your savings rate in two ways: (i) cut down your expenses, and (ii) increase your disposable income.
Both of these will result in increased saving rate. The more your annual income is as compared to expenses, the greater will be your annual saving amount.
In order to cut down your expenses, you need to ask yourself: Is this expense really worth it as compared to enjoying an early retirement? If the answer is no, then you should eliminate it from your monthly budget.
Some simple ways to save money include cancelling your cable subscription, paying off loans, refinancing your car or home loan, using public transport, turning down thermostat during the winters, etc.
You should also look for ways to boost your income. Some great ways to do so include redeeming your lost credit card reward points, taking advantage of balance transfers, selling unused items, investing young, and working online.
In conclusion, you should remember that the answer to the question "how much do I need to retire early?" depends on your saving rate. You should look for ways to cut down your expenses and boost savings in order to retire early. The more your saving rate is, the sooner you will be able to say goodbye to the monotony of 9-5 work life. All that is needed is the financial discipline and belief that you have total control over your spending habits.