For many of us, retiring early is a dream come true. Some of us may love our jobs, but we have so many other things we want to do with our lives that we do not want to spend all of our waking hours working instead of following dreams.
This, among being able to spend more time with the people we love is a reason that many of us hope to retire early. In the UK, most of our retirement fund is managed through our pension schemes, or independently if you are self-employed.
So, with this in mind, how do you get to the stage where you can retire early?
A Dream Come True
Define what retirement means to you. When you start planning your early retirement, you may still want to work, just not in the way you have been, perhaps you want to work for yourself, or generate income as a writer, artist, or selling things you make.
Perhaps you just want to have more defined control of how you spend your days. We may assume that retirement means simply not having to work, so realistically, we are going to say that in this instance retirement means long-term financial independence.
You do not have to laze around and do nothing, but hypothetically you could do so if you wanted to.
The traditional age of retirement is between 60 and 65, however, this is increasing. So, we will state that early can constitute anything before this.
Planning Is Half The Battle
Retiring early is not so easy, and half the battle to get to this point is just planning.
A big part of planning an early retirement is in how you budget your money, and not just now either, it is also in planning a budget for when you retire.
You want to ensure that you will still have financial freedom and independence when you retire and that you will not be scrapped for cash at any point.
Have A Vision
The first thing you need to do is have a vision. You should plan ahead with a clear vision of your life during retirement. So many people want to retire early, but they do not actually have a clear idea of how retirement will look for them.
You do not want to get to a point and then realize you had the wrong idea and planned wrong.
If you were to retire, you will need to fill those hours you would usually be working with something else, make sure you know what it will be. Sure, you might wish you had more time now, but adding 40 to 50 hours to your week with free time is a lot.
Know what you will do with it.
Pay Off Your Debts
Once you have a plan for your retirement, you will want to start paying off things that are holding you back from saving even more. You do not want to enter retirement with debt holding you back.
In fact, retiring with debt in place is a pretty bad idea as if you spiral and end up in more debt you have little to help you get out of it.
Pay off your debts before you retire, and once you have paid off your debts you will have more wiggle room available to start saving even more.
Pay Off The Mortgage
Much like with debt, it is wise to have paid off your mortgage before you retire too. Mortgages can be huge and having these weighing you down will only be a burden during retirement.
When you retire you want to know you have a place that is perfectly yours. So pay off that mortgage ASAP!
Budget Your Basic Needs In Retirement
Budget your retirement around where your money will be going, and then add a 10% contingency on top.
Why? Well, we all know the cost of living fluctuates and these days it is just rising higher and higher, so it is wise to account for this in your budget.
Also consider other factors, utilities, groceries, travel costs, housing costs if you do not own or want to buy another property.
Consider everything you can. And once your basic needs are covered, add on the additional costs of leisure and such.
Formulate A Budget plan
Start working on your budget to create an idea of how much money you will need to retire comfortably.
A comfortable retirement is key, there is no logical reason to retire early if you will simply be scraping by each month.
