Plan Your Path to an Early Retirement

While this statement holds true in many cases, early retirement isn't always one of them. However, while early retirement may not be a realistic goal for all, it could be an option to more people than you might think -- especially if it is identified as a long-term goal early in a financial planning strategy. And while it might seem like a mirage in the distance that fades as you draw nearer, early retirement may not be as difficult to attain as it might seem. If you're interested in an early retirement, there are certain steps you can take to increase the likelihood of that happening.

GOALS

Goals are important to any financial strategy whether it involves early retirement or not. Short, mid-term, and long-term goals can make financial progress real, identifiable, and manageable. You can use goals to track your financial progress, gauge your successes, failures, and areas of improvement, and then to re-evaluate your progress.

Smaller goals such as building an emergency fund, paying off short-term debt, or starting a retirement fund are great ways to begin. Stretching these goals into things like paying off all debt, buying or paying off a home, maxing out retirement contributions, and other long-term goals can better prepare you for early retirement.

It can be important to track and revisit your goals at least once or twice a year, making sure to write out or type a list of your goals and keep it in a safe place where you will remember it. Having these points down on paper can give them more impact and make it less likely that you'll forget about them.

IDENTIFY WEAK POINTS

Understanding where your financial weak points are can be one of the best ways to avoid issues when it comes to planning for an early retirement. If you are a great saver, but you don't know where or how to invest the money you save, then you could be delaying your retirement. What if you or your spouse has a health condition that may require one of you to continue working in order to maintain health coverage? It's areas such as these that can prolong your working years, and which should be focused upon as issues that can delay retirement. By planning for such chinks in your financial armor, you can be prepared for pitfalls and problem spots that might occur due to or delay an early retirement.

SPLITTING EXPENSES

One of the best ways to make early retirement a reality is through the ability to split expenses. While not everyone has this opportunity, if you are fortunate enough to find yourself able to split expenses with a roommate, partner, significant other, family member, spouse or whomever, you might find yourself on the fast track to early retirement. When splitting expenses with someone, it's like paying half price for things like rent, utilities, renters or homeowners insurance, and similar shared expenses. It's the equivalent of being able to double your spending power, or if your heart is set on early retirement, double your saving power!

TRACKING EXPENSES

While many personal finance experts have talked themselves blue in the face regarding the importance of tracking expenses, it really is pertinent to understanding your financial situation. If you want to retire early, you must truly understand your expenses. This understanding includes how much you spend, on what, how often, and ways in which you can trim your expenses if or when needed.

Once you have a clear understanding of your expenses, your path to early retirement is often significantly clarified. Knowing where your money goes can allow you to better project future expenditures, build budgets, set goals, and better estimate what maintaining your lifestyle and living expenses in retirement will require.

A SAFE WORKING ENVIRONMENT

Just about everyone has heard that they should have their money work for them. However, finding safe and reliable investment vehicles to make that vision a reality is not always easy.

It seems that we are conditioned by the financial services industry to either believe or expect that we are due returns of 8 to 10% upon our money each year. Look at almost any growth prediction chart that you receive from your retirement portfolio manager and I'll bet you're likely to see their projections are based upon one of these expected return percentages, and as we've seen lately, those percentages aren't always realistic. All these numbers really do is condition everyday investors to believe that those are the returns they deserve and should expect. The industry urges us not to just invest in bonds so that we can 'keep up with inflation' but then loses 40% of our portfolio in a single year. I would rather not have kept up with inflation given the option. You have to look at the risk verses return no matter what the financial 'gurus' say.

You don't have to have huge returns upon your money to make it grow and prepare for a comfortable retirement. Isn't it better to have your money growing slowly, than to have no money at all? This is why it is important to stay levelheaded and not get greedy when it comes to your returns. I don't care what anyone says. I'd rather have my money earning a measly two or three percent in government bonds or CDs, than in the hands of Wall Street banks and traders as they buy and sell their way to huge fortunes at my expense.

MAKING THE MOST OF YOUR MONEY

It isn't always about how much money you make, but what you do with the money you have. Not everyone needs a million dollars to retire comfortably. Keeping your expectations realistic, your goals attainable, and realizing that living modestly can help guide you away from poverty, then it might not take much money to sustain you in your retirement. If you understand your money, how it can work for you, and how you can make the most of what you have by living within your means, then an early retirement might just be in your future.

Disclaimer:

The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute legal or financial advice. For financial advice, readers should consult a licensed financial advisor. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.