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The traditional retirement age in America is 65. But a large number of Americans are unable to announce their retirement at the right age. They are spending their golden years on the job.
People in our nation have to delay their retirement due to the lack of savings and debt. Many older Americans are struggling with credit card debt, and mortgage and student loan debt. Thus, they can’t say goodbye to the 9-5 work grind. They are bound to work to get out of the debt and save some money to survive in their retirement.
Financial independence and early retirement is an impossible thing that they can only achieve in their dream.
However, many people have proved that achieving financial independence and early is possible.
The key is proper planning. Apart from this, there are some financial steps that you have to follow to achieve financial independence and early retirement.
Step 1: Get out of your existing debt first
To achieve financial independence, you have to get out of debt as soon as possible. When you have accumulated multiple debts, it is obvious that your financial freedom will be threatened. Most often, with a large amount of debt burden on your shoulders, you will be unable to save for your retirement.
- Stop accumulating more debt
The first and foremost step of eliminating your debt is to know how you can stop getting into more debt. Use cash for all these purchases so that you don’t end up spending more. Also, pay your credit card bill in full and within the time to avoid falling into credit card debt.
- Avoid using multiple credit cards
An easy and simple way to eliminate your credit card debt is by not using multiple credit cards anymore. You should completely stop using all your credit cards. And if you must, use a credit card that has the lowest interest rate. Even for this single credit card that you are using, use it only in case of emergencies and not when purchasing your everyday necessary items.
- Make more than the minimum payment
If you make only the minimum payments on your debts every month, you are only paying the interest amount accumulated and not making any payment towards paying off your principal. You need to make significant payments to pay off your principal and also reduce the subsequent interest charges.
- Transfer your balances to a low-interest card
You can transfer your credit card balances to a card with a low-interest rate. Many credit card companies offer you such low-interest cards which have the offer of low interest valid for a certain period of time. You can transfer your balances in high-interest cards to one of these low-interest cards and pay off the debt within the introductory period.
- Seek professional debt relief help
If you are unable to pay off your debts on your own, you should take professional help to get out of your existing debt. You can take help of debt consolidation or debt settlement to get out of debts easily.
Step 2: Practice frugal living to start saving as much as possible
If you want to achieve financial independence and early retirement, you have to start saving money as much as possible. After getting out of debt, you should concentrate on saving.
Some money management strategies that you can follow to save more are:
- Track your expenses
It is important for you to follow all of your expenses closely so that you do not miss payments and so that you always remain within your limit and your budget. Sit down and make a list of your income from all sources. In this way, you can do away with all your impulse buying and buying things that you cannot afford.
- Live a frugal life
Frugality does not mean that you will have to give up on all of your luxuries. But, it is that you will have to try and lower all of the unnecessary expenditures. You will have to learn to save from whatever you are using, and you will have to change your spending style.
- Prepare a budget
First of all, try to prepare a frugal budget so that you are able to save more than you can usually do. Live on less to save more. Then put these savings into your savings and emergency accounts. You should save money for your future and for emergency purposes so that you don’t need to borrow in emergency conditions. Budgeting is not scary. Install a free online budgeting app on your smartphone. However, revisit your budget from time to time to make the necessary changes.
- Cut down extra cost
You should eliminate the unnecessary cost to save more. Revisit your monthly budget to find out the extra cost that you can eliminate. It will help you to save more.
- Set aside a portion of your income
You should try to save as much as possible. If you want to achieve financial independence, you should set aside 25%-30% of your income every month. Automate your savings to that you can avoid spending money on useless things.
- Use a credit card only in need
It is always better to avoid using credit cards if not needed. You should also avoid using credit cards for buying everyday items so that you don’t rack up more debts. Keep your credit cards for emergency purposes, for example, you can use a card if you have forgotten to carry cash.
- Build up an emergency fund
Try to save at least 6-9 months of savings in an emergency fund to avoid surprise debt in life. The emergency can arise at any time. So, you should be prepared for that beforehand. If you want to enjoy a debt-free retirement, then build a fat emergency fund.
Step 3: Buy insurance to avoid financial loss
Insurance secures you and your family. So, buying insurance should be your first step towards achieving the financial freedom. There are various kinds of insurance policies available to the consumers that address different purposes. The different types included in insurance are life insurance, health insurance, credit insurance, home insurance, automobile insurance, travel insurance and so on. So, you can buy some as per your requirements and your affordability.
Step 4: Try to earn more
You should also try to improve your income to secure your financial future. If you have more money in your hand, you will be able to save more. In order to do this, you can do freelancing or blogging, or you can also do a part-time job to earn more.
Step 5: Grow your money to build wealth
Only saving money and raising income is not enough, you have to grow your wealth so that you can announce early retirement. What should you do to grow your money?
Here you go:
- Make investments
To grow money, you can make investments. However, you should seek professional help or advice before investing money.
- Open retirement accounts
You should save money into a retirement account to secure your golden age. You can take advantage of the 401(K) account. If you are a businessman, you can also open a retirement account for saving money.
Lastly, achieving financial independence and early retirement is difficult but not impossible. With effort and determination, you can achieve it. Though it’s not easy, remember that the first hindrance in achieving early retirement is debt. If you don’t address your debt from the beginning, it will go on increasing. It can create havoc in your financial life, and you may also become bankrupt if you don’t pay off your debts from the beginning.
So, stay away from debt. Make your mortgage payments and student loan debt payments on time. And look into getting flexible repayments options and government grants for paying off your student loan debts.
After that, concentrate on saving more and more. It will help you to secure a financial future and thereby achieve financial independence.