Who doesn’t want to retire early? Have you ever asked yourself this question – What should I do if I want to retire earlier? Here are five easy things that you can do to retire early! The sooner you focus on doing them – the earlier you will be able to retire.
1. Retire all your Debt
The sooner you are debt free, the sooner you can retire. I do not think that you can think of retirement when there are bills and EMIs to pay. Imagine sitting in your luxurious car and dreaming about retirement. Well if the car has been acquired through a loan, you can only dream about retirement. You cannot retire!
Several people tell me that how can they be debt free – they need a house and need a car. I would agree that you may need to take a loan for your house but I do not agree that you need a loan for a car. I would agree that you would need a loan for your first house – but why borrow again for your second house. If you are doing so, you are only increasing your lifestyle in the belief that you will be able to afford it later. Perhaps yes, but it is certain that with this approach you cannot retire early for sure.
2. Never lose focus on your Health
The biggest unknown in retirement is medical expenses. You do not know what kind of health challenges you will go through and how much of your wealth will get consumed to deal with these challenges. It is never too late to make fitness your No. 1 goal – if you are fit, you have a good chance of not only spending less money on health issues but actually enjoying your retired life.
3. Eliminate Wasteful Expenses
The No.1 determinant of what investment corpus you will need on retirement is your lifestyle. I am not trying to preach that you lead a frugal life. All I want to communicate here is that the biggest determinant of the investment corpus that you need in your retirement is your lifestyle. Lesser the expenses, lesser is the investment corpus required. In my observation, reducing 20% to 25% of your expenses is easy. All you need is to be aware of the same, and you would have to save a lot as you enjoy your life. The simplest example I can give here is to do your airline and hotel bookings in advance. Every airline and hotel can give you substantial discounts if you book in advance. Is this really too difficult to practice?
4. Follow the 10% Rule
This is a rule that I have followed throughout most of my career. I always saved 10% of my take home salary and 50% of my bonuses (by the way there have been several years where there we no bonuses paid – lol!) and invested these savings in equity mutual funds. Systematic Investment Plans are a great way to execute this. The good part is that you do not feel guilty of spending whatever is left in your bank account. This method can not only help you sort your retired life, it can also help you build an emergency fund, pay for your children’s education and many other expenses that will come along the way.
5. Treat your Equity Investments as expenditure
Many of us are risk averse and hate to invest in equities. A good way to start investing in equities is to start so small that you can forget these investments.
Let us assume that the amount you spend on a night out is Rs 3,000 every week. How about investing this amount every month in equities. If you can leave this for 10, 20 30 years…. Guess what would happen to this money?
If you earned 15% per annum on these investments (BSE Sensex has delivered 15% since inception over three decades), you would be surprised that Rs 3,000 saved every month has grown to Rs 2.1 Crores in 30 years. Now if you do the same for 20 years instead of 30, the amount would have grown to only 45 Lakhs! So the longer you keep this money untouched, the more wealth you will accumulate and which will enable you to retire early. But yes, this can only happen if you genuinely treat your investments as expenses.
