- June 25, 2019
- Posted by: Ethica Private Wealth
- Category: Blog
Retiring early can seem like an impossible goal. Even more so if you look at it from a purely cash-based perspective. There are a lot of strategies you can use to leave the workforce early.
1. Pay Off Your Debt
First things first, pay off your debt. You may not be able to afford to go all in on your mortgage or car and pay them off instantly. However, there are some alternatives to explore with a financial advisor. The same applies to any loans or credit cards. Reducing your debt to zero should be your first priority while you are still generating an income. For example, you would end up paying back somewhere around an extra $7000 on a $15,000 credit card balance over five years. This is money that you could be investing or contributing to your retirement.
2. Consider Overlooked Financial Resources
Take an audit on your life. Think about any previous employers which you may be able to receive entitlements from in retirement. Thinking about income streams outside of the traditional retirement realm. There may be many things that you have overlooked or forgotten about because they didn’t seem worthwhile.
3. Invest Early and Aggressively
If you’re young, start investing now. It’s just common sense that a dollar invested when you’re 20 will have more growth potential than a dollar invested when you’re 50. When you reach retirement age, your investment would have 45 years instead of 15 to grow and work for you. Talking to a financial advisor about investment in your 20s can set you on the right track.
4. Start a Retirement Account Today
Similar to investing at a young age, someone in their mid-20s that puts away $4000 a year can end up with up over $800,000 by the age of 60. If you start an account when you start working, you also won’t have to worry about having to find numerous super accounts created by previous employers later in life.
5. Invest What You Save With Smart Travel Planning
We’ve already gone over how to budget for travel in retirement. Some of these strategies can be used to plan travel before retirement too. There is no need to deprive yourself of luxuries while you’re working, but you can save a ton of money with services like Airbnb and home-swapping networks. With the money that you save, you can put that back into investments for retiring early.
6. Don’t Ignore Your Retirement Account
As you get closer to retirement, you should periodically review your retirement accounts and investments to make sure your money isn’t building up dust. Your money should be generally placing an emphasis on high-yield investments. Make sure your money isn’t just sitting in an account earning a fraction of a percent, let it work for you.
7. Passive Income
Retirement doesn’t have to mean throwing away every source of income you have. The best situation you could find yourself in is to earn money without having to work. Investments such as rental properties is a way you can generate some passive income. You can even reduce the work of that by bringing a property manager on board.
8. Practice Cash Flow Management Strategies
Creating a workflow for your cash can have amazing results. Putting money into regular systematic investments while you’re working will double your efforts in building your portfolio. You will find that this is the most important long term action that you can do to build your portfolio.
9. Live Below Your Means
We don’t just mean bringing lunches from home instead of going out. So many people see gardeners, cleaners and beauticians as a necessity. Living two or three times below your means will drastically help you contribute more towards your retirement account and investments.
Individually, these strategies can help get some more money into your retirement account, but together these strategies can dramatically help to improve your portfolio standing for early retirement.
This information has been provided as general advice. We have not considered your financial circumstances, needs or objectives. You should consider the appropriateness of the advice. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication.